NEW YORK — Market sentiment is so fragile that news of an arrest is enough to set off a selling wave.
The Dow declined 450 points, or 1.8%, at Thursday’s open. The S&P 500 lost 1.8%, while the Nasdaq plunged 2%.
The arrest of Huawei CFO Meng Wanzhou in Canada at the request of the United States renewed doubts about the US-China truce..
The latest sign of tension between Washington and Beijing also sent shudders through global markets. Hong Kong’s Hang Seng plunged 2.5% overnight, while European stock markets declined sharply as well.
Companies like Apple and Boeing that have significant exposure to China fell sharply. Alibaba, the Chinese e-commerce giant, tumbled 5%.
The arrest of Meng — the daughter of the founder of one of China’s most important companies — serves as a fresh reminder that the United States and China remain in a trade war, despite the ceasefire reached last weekend in Argentina. Tariffs already imposed remain in place and new ones loom if talks fail to result in a breakthrough or at least an extension within 90 days.
“This comes at a truly delicate time,” Win Thin, global head of currency strategy at Brown Brothers Harriman, wrote to clients on Thursday. “We think this will force China to take a more aggressive and confrontational approach with the US.”
Renewed trade jitters, along with worries about an economic slowdown, sent the Dow plummeting 799 points on Tuesday. That selloff wiped out a chunk of last week’s rally, which was the S&P 500’s biggest weekly gain in seven years. US markets were closed on Wednesday in honor of President George H.W. Bush.
President Donald Trump spooked investors on Tuesday when he called himself a “Tariff Man” in a tweet. Trump also suggested tariffs will “MAKE AMERICA RICH AGAIN” — even though these levies are paid by American companies and consumers.
“The market will need to see tangible progress — both in policy and negotiations — before fully embracing the trade truce narrative,” Isaac Boltansky, director of policy research at Compass Point Research & Trading, wrote in a note to clients. “We struggle to see how a comprehensive agreement can emerge in the next 3 months and instead expect trade tensions to resurface in earnest early next year.
Investors are also nervously watching the plunging price of oil. US oil tumbled more than 2% as OPEC and its allies debate at a major meeting in Vienna whether to enact a supply cut aimed at balancing the market.
Saudi Arabia, the leader of OPEC, hinted that the reduction could be less than what analysts anticipated. Khalid Al Falih, the kingdom’s energy minister, told reporters that a cut of 1.3 million barrels per day is “excessive.” Sources told CNN’s John Defterios that talks are so tense that a final decision could be delayed until Friday.