Thursday 6 December 2018 11:04 pm

Volatile day for stocks after Huawei executive’s arrest sparks trade fears

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US stocks closed down today despite fierce fightback in the final hours of trading as the arrest of a top Chinese executive sparked a volatile day of trading.

The Dow Jones fell more than 500 points at one point after the arrest of Meng Wanzhou, chief financial officer of telecoms giant Huawei, reignited fears about the country’s trade war with China.

But bulls gained ground in late trading and the Dow closed down just 0.32 per cent.

The late surge followed a dramatic day of trading in the UK as the FTSE saw its biggest one-day drop since the referendum, closing down 3.15 per cent.

Elsewhere in Europe, the Euro Stoxx fell 3.69 per cent, while the MSCI’s index of Asian stocks excluding Japan was also down.

US markets were closed on Wednesday for the state funeral of president George HW Bush. But any hopes of stability following the hiatus were soon dashed in early trading today as blue chip stocks led a renewed downturn.

The fall followed heavy losses on Tuesday, when the Dow dropped 800 points amid doubts about a trade ceasefire between President Trump and President Xi.

Meng, who is the daughter of Huawei’s founder, was arrested in Canada and could face extradition to the US. The charges are unknown, but the US has been investigating the Chinese firm on suspicion of violating trade sanctions with Iran since 2016.

Her arrest was a stark reminder that the US’s ceasefire with China, which was announced at the beginning of the week, remains fragile.

“The Huawei arrest appears to be the straw that broke the camel’s back,” said Connor Campbell, financial analyst at Spreadex.

“The rapidly dwindling good-feeling towards the US and China’s vague trade war ceasefire turned actively hostile with investors fearing that, 90 day truce or not, the relationship between the two superpowers might be about to take a turn for the worse.”

But US stocks soon began to claw back the losses and closed well above their lows for the day. The S&P 500 closed down 0.15 per cent, while the Nasdaq was up a marginal 0.42 per cent.