By David Hodari, Mike Bird and Jessica Menton
U.S. stocks fell sharply Thursday, as global markets shuddered
over the arrest of a top Chinese tech executive and a fresh plunge
in oil prices.
The Dow Jones Industrial Average slid 490 points, or 1.9%, to
24555 while the S&P 500 lost 1.7%, putting both indexes on
course to fall into red for the year. The Nasdaq Composite declined
2%, but the technology-heavy index is still up 1.7% in 2018.
The losses come after the Dow industrials plunged nearly 800
points Tuesday ,as investors' concerns over the U.S.-China trade
truce renewed fears about the pace of economic growth. Tuesday's
declines also pushed the Nasdaq more than 10% below its August
high.
"Everything feels out of control right now," said Michael
Antonelli, equity sales trader at R.W. Baird & Co. "Clients are
starting to get more jittery."
Canadian authorities arrested Huawei Technologies Co.'s chief
financial officer, which fanned fears of another escalation in
tensions between the world's two largest economies.
Market reaction to the arrest of Huawei's CFO threw into sharp
relief the obstacles that lie ahead for negotiators in Washington
and Beijing.
"Markets were already under pressure, and the arrest hasn't
helped," said Neil Mellor, senior currency strategist at BNY
Mellon. "We're back to where we were beforehand, and we're
wondering if a deal's possible given how high the stakes are."
Tech firms have been among those worst hit by icy trade
relations between the U.S. and China, which have weighed on global
markets and prompted fears of slowing global growth so far this
year. Dow component Intel fell 1.4% Thursday.
Sharp selling marked a continuation of downbeat trading seen
earlier in the week, as optimism from the G-20 waned amid
persistent growth fears and sliding U.S. bond yields.
The yield on U.S. 10-year Treasurys was last 2.867% having
slipped from 2.921% late Tuesday. The WSJ Dollar Index was last up
0.2%.
In addition to headlines out of China, U.S. investors were
awaiting a speech scheduled for Thursday from Federal Reserve
Chairman Jerome Powell, which will be scrutinized for signals
related to the central bank's interest-rate policy.
While CME data gave a 76.6% probability of a rate increase at
the Fed's December meeting, figures show a less clear consensus for
2019, reflecting estimates of just over one rate raise. But some
analysts see that as an overly dovish forecast.
"Now everyone is looking at the Fed. The market took the Fed's
recent commentary as dovish and our view is that was an exaggerated
interpretation," said Christian Keller, head of economics research
at Barclays Investment Bank.
Oil giant Chevron, meanwhile, fell 1.8%, with sector peers
following suit as a fresh wave of selling pounded oil-and-gas
shares and global energy prices.
Oil prices pared some of their earlier losses but Brent crude
remained 2.3% lower at $60.15 a barrel, and West Texas Intermediate
futures fell 2.8% to $51.43 a barrel, after Saudi Arabia's oil
minister said there had not yet been any agreement made over oil
output cuts. Still, market participants were expecting an agreement
to emerge in Vienna, where the Organization of the Petroleum
Exporting Countries and its allies were scheduled to meet Thursday
and Friday.
Bleak sentiment in the U.S. echoed that in Europe, where the
Stoxx Europe 600 index slid 2.6% in afternoon trading. That index,
as well as benchmarks in Germany and the U.K. were all on course to
close at two-year lows. The European basic-resources sector led
stocks lower and was on course to notch a 17-month low. The fresh
wave of negative sentiment hammered the benchmark's technology and
energy basket, which fell 2.9% and 2.4%.
Losses were heavy in Asia, where Japan's Nikkei 225 fell around
2%. Hong Kong's Hang Seng Index, as well as tech-dominated indexes
like China's Shenzhen A-Share and the Taiwanese Taiex, were all
more than 2% lower.
China's Commerce Ministry said Thursday that Beijing would
"immediately implement" agreements made at the Group of 20 summit
in Argentina involving the Chinese purchase of U.S. products. The
ministry also said planned talks on U.S. intellectual property and
market-access concerns would occur within the allotted 90-day
window before U.S. tariff increases are set to resume.
The Hong Kong-listed shares of China's ZTE Corp. -- a rival to
Huawei and the nation's second-largest telecom equipment maker --
fell almost 6%. Shares of Huawei's suppliers and partners also
slumped, with phone-camera-lens supplier Sunny Optical Technology
down 5.5%. Shares in Telefon AB L.M. Ericsson, one of Huawei's and
ZTE's largest competitors, were last 1.7% higher, and were one of
the few Stoxx Europe 600-listed stocks to climb Thursday.
The U.S. dollar bonds of privately owned Huawei touched new lows
after news broke of its CFO's arrest. The company's debt maturing
in 2025 has already been hit this year, and its yield climbed to
5.865% Thursday, up by more than 2 percentage points since January.
Bond yields rise when prices fall.
"The panic reaction reflected investors' concerns over a
technology battle between the U.S. and China," said Steven Leung,
an executive director at UOB Kay Hian.
The impact of those headlines rippled across financial markets,
causing at least one company to abandon its initial public
offering. Denmark-based media company Adform announced it was
postponing its IPO, citing "a period of high volatility and
uncertainty in the financial markets, especially as regards
technology stocks."
The Shanghai Composite and Shenzhen A-Share indexes have fallen
21% and 29%, respectively.
The Chinese yuan, which has borne the brunt of trade anxieties,
was last down 0.6% against the U.S. dollar, despite the China's
Commerce Ministry's statements Thursday. The ministry also said it
was confident about reaching consensus with the U.S. within three
months.
Joanne Chiu contributed to this article
Write to David Hodari at David.Hodari@dowjones.com, Mike Bird at
Mike.Bird@wsj.com and Jessica Menton at Jessica.Menton@wsj.com
(END) Dow Jones Newswires
December 06, 2018 10:10 ET (15:10 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.