Global markets show costly uncertainty as US-China trade war truce skips a beat
AP Photo/Ng Han Guan
Financial markets went down throughout the world on Thursday following rising uncertainty in international trade as a tumultuous week grows to a close.
Indexes in Europe all showed 3% drops in valuation, with London's FTSE index losing more than $71 billion in value - its worst day since the day after the Brexit referendum, according to The Guardian.
Asian markets, where waves of selling had been a catalyst to the European down trend, showed a careful return to stability on Friday, but observers remained nervously cautious.
The markets reacted to fears that an all-out trade war between the United States and China, which had been temporarily assuaged following a sit-down meeting between the presidents of the two economic behemoths, have been rekindled.
China announced a string of conciliatory measures earlier this week, including the reduction of tariffs on American imports and stiffer punishments for serious infringers of intellectual property.
Donald Trump and Xi Jingping met on Saturday on the sidelines of the G20 summit in Buenos Aires last week and agreed a 90-day truce in their tit-for-tat trade war.
But on the same day, Canada arrested Meng Wanzhou, the chief financial officer of Chinese tech giant Huawei, following a request for extradition to the United States.
Markets braced for a renewal of hostilities after Beijing immediately asked for explanations, while tempers were rising back in China.
Publicly-owned paper Global Times went as far as calling the arrest a "kidnapping".
The executive is wanted for questioning over possible trade with Iran, which would violate US sanctions. She is due to appear in court in Canada on Friday.
Donald Trump was apparently not informed of the judiciary's decision to arrest Ms Wanzhou, according to a US official quoted by Reuters. This kind of decision would be in keeping with a general Trump strategy to show strength before conciliation.
The US also apparently asked its allies to stop using products manufactured by Huawei and another Chinese firm, ZTE, over concerns that they could be used for cyber warfare, Japanese media reported on Thursday.
The Japanese government apparently acceded to the request, and will stop using the equipment as early as Monday - although no public declarations were made, so as not to anger its Chinese neighbor.
Markets are also affected by uncertainty over global oil output. Petrol regulating body OPEC said on Thursday that it might be looking to reduce supply in order to shore up prices, an announcement which immediately sanctioned crude oil prices, which fell to a new low at under $60.
Crude oil prices have fallen by 30% since October, mostly impacted by rising supply. The US announced that it had become a net oil exporter on Thursday, the first time since 1973.
Donald Trump has also publicly advocated for lower oil prices, attracting rare criticism from Saudi Arabia.
Hopefully OPEC will be keeping oil flows as is, not restricted. The World does not want to see, or need, higher oil prices!— Donald J. Trump (@realDonaldTrump) December 5, 2018
- The buck stops with Washington -
Despite presidential rhetoric, officials in Washington seem to be fulfilling their roles as stewards of the global economy.
Investors looking at the health of the US economy for guidance over global market flows seemed optimistic. US job data, which will be released later on Friday, is expected to show further signs that the US economy is expanding.
Jerome Powell, the Federal Reserve chairman, said the US economy was "performing very well overall" on Wednesday night, in a short statement recorded by Reuters.
The Fed is reportedly looking to slow down, or halt, its rise of interest rates - a move that will boost investment and growth in the world's largest economy.
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