Arrest sparks global market panic

Australian shares are poised to slide as trade uncertainty and global growth concerns weigh on Wall Street, which resumed trade overnight after a one-day break.

The SPI200 futures contract is down 15 points, or 0.27 per cent, to 5,642.0, at 0700 AEDT on Friday, pointing to a drop at the open for the ASX US stocks are down on mounting worries of slowing global growth after a fresh twist in China-US tensions, as well as lower oil prices and US bond yields.

The Aussie has edged lower again overnight, buying 72.22 US cents, down from 72.27 US cents on Thursday.

STOCKS TUMBLE AGAIN

US stocks tumbled again Thursday, knocking 300 points off the Dow Jones Industrial Average as the arrest of a senior Chinese technology executive threatened to cause another flare-up in tensions between Washington and Beijing.

China criticised the arrest but also expressed confidence that it can reach a trade agreement with the US. The long-smouldering dispute has deepened investors' worries that the prospects for global economic and corporate earnings growth could be dimming.

Traders continued to shovel money into bonds, a signal that they see weakness in the economy ahead. The yield on the 10-year Treasury note fell to 2.87 per cent from 2.92 per cent on Tuesday, a large move.

US stock and bond trading were closed Wednesday because of a national day of mourning for President George H.W. Bush.

"The market seems right now to be focused on increased risks for a 2020 recession," said Patrick Schaffer, Global Investment Specialist, J.P. Morgan Private Bank. "It's a very hard market to buy when you see really strong signals that we are indeed late (in the economic) cycle."

Oil prices fell sharply as traders appeared to doubt that an expected production cut by OPEC will be enough to boost the price of crude. That helped pull energy stocks lower. Halliburton gave up 5.7 per cent to $US29.49.

Banks, health care companies and technology stocks took some of the heaviest losses in the latest wave of selling. Citigroup fell 5.4 per cent to $US58.89. Managed health care provider Centene dropped 6.1 per cent to $US133.56. Business software company Oracle slid 5.3 per cent to $US129.96.

The S&P 500 index slid 32 points, or 1.2 per cent, to 2,667 as of 3pm. Eastern Time. The Dow dropped 341 points, or 1.4 per cent, to 24,685. The average briefly slumped as much as 784 points.

The technology-heavy Nasdaq composite lost 25 points, or 0.4 per cent, to 7,132. The Russell 2000 index of small-company stocks gave up 19 points, or 1.3 per cent, to 1,461.

The latest losses put the S&P 500 and the Dow back into the red for the year. The Nasdaq was still slightly higher for 2018.

Major indexes overseas also fell sharply. The DAX in Germany dropped 3.5 per cent, while France's CAC 40 lost 3.3 per cent. The FTSE 100 in Britain declined 3.1 per cent, its biggest drop since the country held a vote to leave the European Union in June 2016.

Canadian authorities arrested the chief financial officer of China's Huawei Technologies on Wednesday for possible extradition to the US. The Globe and Mail newspaper, citing law enforcement sources, said Meng is suspected of trying to evade US trade curbs on Iran.

Meng is a prominent member of Chinese society as deputy chairman of the board and the daughter of company founder Ren Zhengfei. China has demanded Meng's immediate release.

The arrest came less than a week after President Donald Trump met with Chinese President Xi Jinping at the G-20 summit in Argentina.

Markets rallied on Monday on news that Trump and Xi agreed to a temporary, 90-day stand-down in their trade dispute. That optimism quickly faded as scepticism grew that Beijing will yield to US demands anytime soon, leading to a steep sell-off in global markets on Tuesday.

On Thursday, China's government said it would promptly carry out the tariff ceasefire with Washington. It also expressed confidence that the two nations can reach a trade agreement. The remarks suggest Beijing wants to avoid disruptions from Meng's arrest.

Even so, investors remained sceptical.

"Trade tensions aren't going away," Schaffer said. "Contradictory statements from the administration have given some people a little bit of pause with respect to the optimism that people felt following the Argentina G-20 conference."

The renewed jitters over the implications that Meng's arrest could have on US-China trade negotiations weighed on big exporters Thursday. Boeing gave up 3.5 per cent to $330.45.

The news also resulted in another down day for markets in Asia. Hong Kong's Hang Seng index tumbled 2.5 per cent and Japan's benchmark Nikkei 225 fell 1.9 per cent. Australia's S&P/ASX 200 lost 0.2 per cent, while South Korea's Kospi sank 1.6 per cent. Shares also fell in Taiwan and all other regional markets.

OPEC countries gathered in Vienna Thursday to find a way to support the falling price of oil. Analysts predicted the cartel and some key allies, like Russia, would agree to cut production by at least 1 million barrels per day.

OPEC heavyweight Saudi Arabia indicated it was in favour of such a cut. The expectation did not keep the price of oil from falling, however, as investors focused on the potential economic disruption from any escalation in the US-China trade dispute.

Benchmark US crude dropped 2.6 per cent to settle at $US51.49 a barrel in New York. Brent crude, used to price international oils, slid 2.4 per cent to close at $US60.06 per barrel.

The dollar weakened to 112.57 yen from 113.19 yen late Wednesday. The euro rose to $US1.1376 from $US1.1342.

Gold gained 0.1 per cent to $US1,243.60 an ounce. Silver fell 0.5 per cent to $US14.51 an ounce. Copper dropped 1.1 per cent to $US2.74 a pound.

In other commodities trading, wholesale gasoline lost 0.8 per cent to $US1.43 a gallon. Heating oil gave up 1.6 per cent to $US1.86 a gallon. Natural gas slid 3.2 per cent to $US4.33 per 1,000 cubic feet.


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