Stock markets have rebounded after the arrest of a top Chinese business executive on U.S. federal charges sent prices plunging amid renewed fears of a trade war.
After tumbling more than 700 points on Thursday morning, the Dow Jones Industrial Average rebounded strongly in the afternoon, finishing the trading session off just 79.4 points, or 0.32 per cent.
Markets worldwide were roiled following the revelation on Wednesday that Huawei CFO Meng Wanzhou had been arrested on suspicion of violating U.S. sanctions against Iran.
Amid the global market turmoil, a Chinese government spokesman eased investor fears by saying on Thursday that the country’s leaders remain ‘very confident’ that a deal with the U.S. can be reached in the agreed 90-day window.
In a move that observers call shocking and unprecedented, Meng, the daughter of Huawei’s founder, was arrested on Saturday in Vancouver, Canada and is set to be extradited to the U.S. to face the federal charges.
Huawei is one of the world’s largest makers of smartphones and telecommunications network equipment.
China’s embassy in Canada harshly criticized Canada and the U.S. for the arrest. It also demanded Meng’s immediate release and denied she had violated any U.S. or Canadian law.
‘China has already made solemn representations to the United States and Canada, demanding they immediately correct their wrong behavior and restore Ms Meng Wanzhou’s freedom,’ the embassy said in a brief statement.
U.S. authorities have reportedly been probing Huawei since at least 2016 for allegedly shipping U.S.-origin products to Iran and other countries in violation of U.S. export and sanctions laws.
Meng’s arrest threatens to upend a newly minted trade truce between President Donald Trump and Chinese President Xi Jinping.
The two leaders reached the 90-day trade war ‘ceasefire’ on the sidelines of the G-20 in Argentina on the very same day as the executive was taken into custody – but before word of her arrest was made public.
Analysts say the case against Meng likely proceeded separately within the DOJ from Trump’s trade discussions, and it’s unclear whether he was even aware of the pending arrest when he met with Xi.
While the surprise arrest could derail the trade negotiations, it may also provide Trump with a bargaining chip if he decides to intervene in the case, experts say.
Shock waves from the arrest rippled around the globe, with markets in Asia, Europe and Latin America all taking a beating.
On Wall Street, Boeing and Caterpillar, which would stand to lose much in an extended trade battle with China, fell the most in the Dow.
However, Boeing CEO Dennis Muilenburg said on Thursday that he is hopeful that China and the U.S. are on a path to resolve their trade spat.
‘We are hopeful coming out of the G20 summit that we are on a path to finding a trade agreement with China that’s going to be productive,’ Muilenburg said in an interview with CNBC.
The price of oil also fell sharply early Thursday as OPEC leaders gathered in Austria to discuss possible cuts in production.
However, OPEC’s members appeared to be scrambling to reach an agreement on production cuts, scrapping a press conference at the last minute as members of the cartel squabbled over how the cuts would be distributed.
Falling oil prices hit stocks in the critical energy sector. Last week, the U.S. exported more crude oil and fuel than it imported for the first time on record, underscoring the increasing importance of oil production to the American economy.
Traders continued to shovel money into bonds, a signal that they see weakness in the economy ahead.