Europe midday: Stocks hit two-year low as China-US tensions flare again
European stocks sank to a two-year low on Thursday after news broke that Canadian officials had arrested the finance chief of Chinese technology giant Huawei at Washington's request, in connection with the alleged violation of the sanctions regime against Iran.
Analysts were concerned that the arrest of Wanzhou Meng, which was carried out on 1 December, just as the US President, Donald Trump, and his Chinese counterpart, Xi Jinping, were holding meetings on the sidelines of the G-20 summit in Buenos Aires, might scupper trade negotiations between the two giants.
Ottawa's move and Washington's request that she be extradited to the States sparked an angry response from Beijing, although afterwards the country's foreign ministry said trade talks should continue.
"The pace of selling across indices is moving from 'gentle' to 'waterfall' as the FTSE 100 touches a fresh two-year low in early trading," said IG strategist Chris Beauchamp.
"Already worried about the economic effects of trade wars, investors are now concerned that this will move beyond the realms of tariffs and into much broader economic and diplomatic conflict, with dire implications for global economic growth. In this kind of environment, equities look overvalued, and thus we should expect the losses to deepen from here."
As of 1201 GMT, the benchmark Stoxx 600 was down 2.18% or 7.84 points at 346.43, and at its lowest level since December 2016, alongside a drop of 2.5% or 280.22 points to 10,920.02 for the German Dax, while the FTSE Mibtel was declining by 2.54% or 492.11 points to 18,834.00.
In the background meanwhile, the yield on the benchmark 10-year Italian Treasury note was climbing by seven basis points to 3.13%, amid reports that deputy prime minister Matteo Salvini was reticent to lower Rome's budget deficit target below 2.2% of GDP next year.
According to ANSA, on Thursday morning, Salvini also came out to deny newspaper reports that economy minister, Giovanni Tria, might be set to step down.
Economic news out of Europe was otherwise positive, with readings on both German factory orders and Greek unemployment both coming in better-than-expected.
In Germany, manufacturing sector orders rose by 0.3% month-on-month in October, the ministry of finance said, beating forecasts for a drop of 0.4%.
Over in Greece meanwhile, ELSTAT reported a fall in the country's rate of unemployment from 18.9% for August to 18.6% in October.