U.S. equity futures tumbled at the Asia open, sending a shock wave through stocks and setting the tone for Thursday trading. European and Asian shares slumped while Treasuries were steady and the dollar edged higher.
While contracts on the S&P 500 pared the worst of their decline -- selling pressure had at one point forced intermittent pauses in trading -- the mood was set and the MSCI Asia Pacific Index deepened losses through the day. The Stoxx Europe 600 Index tracked the move, extending its decline a third day as every sector retreated.
The precise catalyst for the futures sell-off was unclear, but Hong Kong shares slid 2.5 percent after the arrest of the chief financial officer of tech giant Huawei Technologies Co. -- a move which threatens to reignite U.S.-China tensions. The yuan dropped the most since October.
Whether or not it triggered the slide, Canada’s arrest of Huawei’s CFO and reports it may extradite her to the U.S. could put a damper on sentiment, just days after an apparent breakthrough on trade between America and China.
“This move against the Huawei CFO has just added another spanner in the works,” Eleanor Creagh, strategist at Saxo Capital Markets, told Bloomberg TV in Sydney. “It’s really illustrative of the fact that the trade truce we saw over the weekend between Trump and Xi doesn’t really do much to mend the underlying relationship between the U.S. and China that is still deteriorating.”
Elsewhere, Bank of Japan Governor Haruhiko Kuroda said economic risks from abroad could be severe, and the Federal Reserve’s Beige Book report showed fading optimism over growth prospects at U.S. firms even as most districts continued to report a modest expansion. Oil in New York edged lower as core OPEC members gather in Vienna to thrash out production cuts.
The pound slipped as U.K. Prime Minister Theresa May searched for a compromise to avoid a crushing defeat on her Brexit deal in a key vote in Parliament next week. - Bloomberg -