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Shares spiral on arrest of China executive; oil sinks as output decision delayed



NEW YORK (Reuters) – Stock markets around world tumbled on Thursday as the arrest of a top Chinese technology executive cast further shadows on U.S.-China trade relations, while oil prices sank on fears of smaller-than-expected output cuts.

The arrest of smartphone maker Huawei Technologies Co.’s Chief Financial Officer Meng Wanzhouof in Canada for extradition to the United States came as Washington and Beijing prepared for key talks aimed at resolving a bitter trade spat.

The Dow Jones Industrial Average fell 679.46 points, or 2.71 percent, to 24,347.61, the S&P 500 lost 67.8 points, or 2.51 percent, to 2,632.26 and the Nasdaq Composite dropped 139.83 points, or 1.95 percent, to 7,018.60.

MSCI’s gauge of stocks across the globe shed 2.53 percent, while the pan-European STOXX 600 index lost 3.31 percent.

Emerging market stocks lost 2.76 percent. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 2.28 percent lower, while Japan’s Nikkei lost 1.91 percent. Canadian authorities late on Wednesday said they had arrested Meng, also the daughter of Huawei’s founder, on Dec. 1, the same day that U.S. President Donald Trump and Chinese leader Xi Jinping met at the G20 summit in Argentina.

The world’s two economic superpowers had agreed on a 90-day trade truce period to hammer out a more permanent agreement, which sent global stock markets soaring on Monday. Equities reversed course the next day as uncertainty grew that the U.S. and China could, in fact, find common ground.

“In general, we all have the same questions we did on Tuesday,” said Art Hogan, chief market strategist at B. Riley FBR in New York. “The news on Huawei throws another level of uncertainty on our ability to actually come to some agreement with China.”

China’s foreign ministry said neither Canada nor the United States had clarified the reason for the arrest, but a source earlier told Reuters it was related to violations of U.S. sanctions.

Earlier this week, shorter-dated yields rose above medium yields for the first time since early 2008, which fanned fears about a U.S. recession in the coming months and also sent Wall Street shares sliding.

Trader works on the floor of the New York Stock Exchange (NYSE) in New York, U.S., December 6, 2018. REUTERS/Brendan McDermid

U.S. Treasury yields tumbled on Thursday with 10-year yields hitting three-month lows as worries about U.S.-China trade and Brexit spurred safe-haven bids.

Additionally, traders scaled back expectations on the number of rate hikes the Federal Reserve would implement amid weakening economic data and market volatility.

U.S. jobs data is due on Friday. If the figures show any serious weakness, markets are likely to react, said Shuji Shirota, HSBC’s head of macro economic strategy.

The U.S. dollar weakened against major peers as Treasury yields slipped and traders scaled back rate hike expectations.

The euro was 0.39 percent higher against the dollar at $1.1388.

Also pulling down equity markets were oil prices.

Oil fell more than 4 percent in choppy trading after OPEC ended a key meeting having made no decision on crude output, as it prepared to debate the matter with other exporters the next day.

An OPEC delegate said the organization had agreed a tentative deal to cut oil output but had not yet come up with a final figure.

U.S. crude sank 4.65 percent to $50.43 per barrel and Brent was last at $58.86, down 4.39 percent on the day.

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The two have lost 30 percent in value this quarter alone, but this week’s OPEC meeting could bring more surprises.

“The real impact of the meeting will be evident (on Friday) following the release of the OPEC+ joint declaration,” said Abhishek Kumar, Senior Energy Analyst at Interfax Energy.

Additional reporting by Marc Jones, Amanda Cooper; Editing by Bernadette Baum