£56bn is wiped off FTSE 100 in stock market bloodbath after Huawei executive is arrested in Canada to spark new fears of tensions between China and US
- Arrest of Meng Wanzhou has sparked fears of a trade war between US and China
- British stock markets were hit in the fallout, with £56bn wiped off the FTSE
- Index recovers slightly this morning as Chinese reaction seems to be limited
British stock markets sunk to their worst day in two years yesterday amid fears of a trade war between the US and China.
Meng Wanzhou, the chief financial officer of Chinese tech giant Huawei, was detained in Canada this week at the request of US authorities.
Her arrest – in response to suspicions that Huawei violated trade sanctions in place against Iran – sparked fears in markets of tensions between the world’s two biggest economies, the US and China.
In the UK, more than £56bn was wiped off Britain’s biggest listed companies as the FTSE 100 sank to a two-year low, sinking by 3.2 per cent during yesterday.
The arrest of Meng Wanzhou spooked world markets yesterday, wiping £56bn off the FTSE
The FTSE plummeted yesterday, before bouncing back slightly this morning
The index recovered some of those losses this morning. After dropping 217 points yesterday, it had risen by 101 by 9.45am this morning.
Connor Campbell, of Spreadex, commented this morning: ‘The European markets were granted a reprieve on Friday.
‘Though Beijing are very much displeased with the arrest of Huawei exec Meng Wanzhou – China’s media labelled her detention as ‘despicable’ – the fact the country nevertheless announced it was ‘immediately’ applying the trade truce measures agreed with the US appears to have helped reassure the markets that the relationship between the two superpowers hasn’t yet reverted back to its warmongering worst.
‘Granted, that announcement came on Thursday morning, so it perhaps isn’t directly linked to the rebound. However, now that the dust has settled somewhat on Wanzhou’s arrest, investors may be taking a slightly more measured approach to the whole issue.’
Telecoms firm Huawei is also battling accusation that its kit could allow China to spy on other countries.
It comes days after US President Donald Trump reached a truce over trade tariffs with his Chinese counterpart Xi Jinping.
The arrest – and resulting fears of a trade war – sent stock markets into panic yesterday
The two sides had agreed to meet and resolve their differences within 90 days, but Meng’s arrest has thrown this into doubt, bringing back the spectre of huge tariffs and the global economic damage they would cause.
The situation in Britain isn’t helped by the continued deadlock in Parliament over the future of Brexit.
Sterling was trading relatively flat against both the US dollar and euro at 1.277 and 1.123 respectively as Brexit fears kept the British currency shackled.