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Stock markets worldwide declined for the third straight day on Thursday after the arrest of Huawei Technologies Co. Ltd. Chief Financial Officer (CFO) Meng Wanzhou stirred up fresh concerns over tensions between the US and China.

Europe’s tech sector registered a 3 percent slump in early trading, before recuperating to trade down 2.3 percent to €398.80, The mining and automotive sector pulled the UK, Germany, and France to two-year lows.

In the US, S&P 500 e-mini futures dropped nearly 2 percent in Asian morning trade and were last down 1.3 percent to $2,664.88.

Chief strategist Linus Yip stated that the impact in the market is quite big because the Trump-Xi meeting just took place, and people were expecting a 90-day honeymoon.  

Asian equities were also in the red. Huawei is not listed but China’s second-largest telecom equipment manufacturer ZTE Corp. dipped 5.9 percent to HK$15.52, having lost 9 percent earlier in the session.

MSCI's ex-Japan Asia-Pacific index fell 1.9 percent to $485.03. Japan’s Nikkei 225 shed 1.9 percent to ¥21,501.62, its lowest level since October 30, with semiconductor related stocks leading the weakness. Huawei is one of the world’s biggest makers of smartphones and telecoms network equipment.

News of Meng’s arrest also sent stocks of tech companies tumbling sharply, which led to losses in benchmark stock indexes in China and Hong Kong on Thursday.

Hong Kong’s Hang Seng index slipped 2.4 percent to HK$26,156.38, while the Shanghai Composite index sank 1.6 percent CN¥2,605.18. The blue-chip CSI 300 index traded down 2.1 percent to CN¥3,181.67.

Thursday’s decline shows investor confidence is still weak, and the momentum is lacking for the market to rebound, said analyst Zhang Gang, adding that it is near the end of the year, and given the market conditions, some funds will choose to put out of the market and observe on the sidelines.

Ben Kwong, director of research at an investment banking arm in Hong Kong noted Huawei was not the only reason for uncertainty in the market.

People are just as worried about further adjustments in the US stock market, the inverted yield curve and slowing economy there, Kwong stated.

90-day Trade Truce in Doubt

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The news came at a sensitive time for US-China relations. US President Donald Trump and Chinese President Xi Jinpinga had agreed to a 90-day truce in their trade war to provide the two sides more time for negotiations.

The two superpowers are due to start talks aimed at deescalating their long-drawn-out trade war, which is further raising worries about higher US interest rates and other risks to global expansion.

Canadian authorities stated that they had arrested Huawei’s global CFO in Vancouver, where she is facing extradition to the US.

A person with knowledge of the matter said the arrest concerns possible breaches of US sanctions against Iran, although officials have so far remained tight-lipped on Meng’s allegations

The shocking arrest intensified the probability of a major clash between the US and China not only over tariffs but also over technological dominance.

It is technology transfer that people really worry about, said Patrick Yiu, managing director at a debt management firm in Hong Kong, adding that in comparison, the trade deficit issue is not that difficult to resolve.

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