The Dow Jones and the broader S&P 500 index both fell 2.5%, with US investors rushing to catch up with the global sell-off after yesterday’s market closure to mark the funeral of former president George HW Bush.
Other European markets were equally rattled after heavy falls for Asian markets overnight. The German DAX 30 dropped 3.5% and the French CAC 40 fell 3.3%.
Overnight, Hong Kong’s Hang Seng dropped 2.5%, Japan’s Nikkei 225 fell 1.9% and China’s Shanghai Composite was down 1.7%.
Investors took fright at news that Meng Wanzhou (pictured), Huawei’s chief financial officer and daughter of its founder, had been arrested in Canada and faces extradition to the US.
Details of the arrest have not been released but the US has been investigating Huawei over possible violation of sanctions against Iran.
The development has the potential to ratchet up trade tensions between the US and China, just days after the two agreed to a 90-day truce in which they would not implement additional tariffs.
On the FTSE 100, only three stocks escaped losses: precious metals miners Randgold Resources (RRS) and Fresnillo (FRES) as investors fled to the perceived safe haven of gold, and defensive utility stock Severn Trent (SVT).
Miners, sensitive to any downturn in demand from top metals consumer China, were among the worst hit.
Technology stocks, also sensitive to the prolonged spat between the US and China, were also among the heavy fallers. Tech-heavy Scottish Mortgage (SMT) was prominent among the big investment trust fallers, down 5.6% to 463p.
Bookmakers were heavily in the red as the BBC reported the UK’s biggest gambling companies had agreed to a ban on TV adverts shown during live sports broadcasts.
Energy stocks fell as the price of Brent crude fell 3.9% to $59.14 as barrel as the Opec cartel of oil-producing nations met in Vienna.
On the FTSE 250, Premier Oil (PMO) fell 11.5% to 66.1p, Tullow Oil (TLW) dropped 7% to 176.5p and Petrofac (PFC) was down 4.9% at 469.2p, while among ‘small-cap’ stocks, EnQuest (ENQ) dropped 6.7% to 23p.
On currency markets the pound rose 0.4% to $1.277 against the dollar, and was broadly flat at 89p versus the euro as traders awaited developments in the government’s battle to save its Brexit deal.
According to The Times, senior ministers are urging prime minister Theresa May to call off next Tuesday’s House of Commons vote on the EU Withdrawal Agreement, fearful that a big defeat could bring down the government.