It all started with an overnight plunge in S&P futures.
The quick move lower (shown below) seemingly caught everyone by surprise, leaving traders scratching their heads and sending pundits on a fruitless quest for answers that weren’t forthcoming.
(Bloomberg)
Long story short, nobody came along to bid them back up after the knee-jerk lower and the bad omen and sour sentiment bled into the Asia session.
Whether or not news that Canada has arrested Huawei Technologies CFO Wanzhou Meng (who now faces extradition to the U.S. in connection with allegedly running afoul of U.S. sanctions on Iran) was the proximate cause of the S&P futures collapse was largely irrelevant after a couple of hours. This is a market that’s on edge about what everyone views as a tenuous trade ceasefire and the Huawei story appears to bode ill in that regard.
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Chinese stocks were bludgeoned on Thursday with H-shares hit hardest. The CEI dove 2.6% in Hong Kong. This was one of the worst days of 2018 for the gauge.
(Bloomberg)
The Hang Seng fell 2.5% on the session, and is now down some 4% over two days. This is most assuredly not what everyone was hoping for considering how hard Hong Kong rallied on positive trade news on, for instance, November 2. Folks are nervous and Hong Kong is liquid so, naturally, it gets waxed.
(Bloomberg)
AAC and, predictably given the Huawei news, Sunny Optical, fell sharply. Losses are piling up in those two over the past three sessions.
(Bloomberg)
On the mainland, Huawei suppliers GettopAcoustic and O-film Tech were crushed, with the former falling a truly egregious 8%+.
(Bloomberg)
Speaking of the mainland, the CSI 300 fell more than 2% on the day.
(Bloomberg)
You can drill down as far as you like into this rather unfortunate session, but the bottom line is that sentiment has soured materially since Monday and we’re going to need some more ostensibly positive trade jawboning in a hurry to turn things around.
Whether Trump and Xi like it or not their markets are inextricably linked, like Siamese twins. Cut one and they both bleed to death.
China simply can’t keep up the growth pace without cheap, cheap oil. Every economic narrative follows from there, IMO.