US pre-open: Wall St set to join in global selloff as Huawei CFO arrest renews trade fears
Stocks on Wall Street were set to join in the global selloff on Thursday, with the Dow poised to open more than 400 points lower as the arrest of Huawei's chief financial officer promoted renewed jitters about trade relations between the US and China.
At 1210 GMT, Dow Jones Industrial Average and S&P 500 futures were down 1.7%, while Nasdaq futures were 2.2% lower.
It was a sea of red across the pond, with London's FTSE 100 trading down 2.3% at 6,760.28, hitting its lowest level since December 2016, while Europe's benchmark Stoxx 600 index was also 2.3% weaker, at 346.02.
Worries about a trade war were back at the forefront of investors' minds after Meng Wanzhou, the CFO of Chinese telecoms company Huawei was arrested in Canada over the weekend.
She now faces extradition to the US over possible violations of sanctions against Iran. China has urged both Canada and the US to "rectify wrongdoing".
"Traders have quickly moved out of riskier assets reflecting nerves that the arrest is likely to escalate tensions between the US and China once again," said London Capital Group analyst Jasper Lawler.
"The timing of the arrest is key here. Markets are already incredibly nervous over slowing economic growth thanks to the inverted US yield curve. Relations between the US and China were supposed to be on the mend after a productive G20. However, the arrest has the potential to shatter very fragile US -Sino relations which will weigh further on global trade and growth concerns. It looks as though, despite recent heavy selloffs, the bottom is not in sight and the markets have further to fall. The big swings of late are representative of a very jittery market."
Meanwhile, oil prices tumbled, with West Texas Intermediate down 3.1% at $51.30 a barrel and Brent crude 3% lower at $59.78 after Saudi Arabia's energy minister dashed hopes of any steep production cuts at the OPEC meeting in Vienna. Khalid Al-Falih told reporters that no agreement had been reached yet on a production cut and suggested that reducing output by one million barrels a day would be sufficient.
Lawler said: "With concerns that Trump could be running the show behind the scenes following its support for Saudi Arabia in the face of Khashoggi’s murder and Trump’s well-known desire for low oil prices, Saudi Arabia is caught between a rock and a hard place. Not ideal, particularly given the rising concerns over lagging demand from slowing global growth.
"OPEC will need to pull extra cuts out of the bag if the oil bulls are to take control once again."
In corporate news, clothing and home decor retailer Lands' End was likely to be in focus after the release of its third-quarter results.
On the data front, the ADP employment report is due at 1315 GMT, having been pushed back from Wednesday as markets were closed to honour George HW Bush. Trade balance and initial jobless claims are at 1330 GMT, while the ISM non-manufacturing PMI and factory orders are at 1500 GMT.