Wall Street claws back much of the ground lost in an early plunge after news broke of the arrest of Meng Wanzhou.

US stocks clawed back much of the ground they lost in an early plunge triggered by the arrest of a key Chinese Huawei executive at Washington’s request.

The initial drop joined a global rout, reviving worries over trade tensions.

The detention of Meng Wanzhou, 46, Huawei Technologies Co Ltd’s chief financial officer, threatens to drive a wedge between the United States and China just days after they agreed on a 90-day trade-war truce in Argentina on Saturday – the day she was detained.

The arrest and any potential sanctions on the world’s number two smartphone maker could have major repercussions on the global technology supply chain.

Global shares tumbled as news of the arrest heightened anxiety over prospects of a collision between the world’s two largest economic powers, not just over tariffs but also over technological hegemony.

Market drop

After losing 780 points in early trading, the Dow Jones Industrial Average largely rebounded to finish the session down 79 points or 0.3 percent. The S&P 500 also ended well off session lows to close down four points or 0.2 percent.

Meanwhile, the tech heavy Nasdaq erased all of its early losses to finish in positive territory.

Global markets were unsettled after news broke of Meng’s arrest in Canada at the behest of US authorities. She now faces possibly extradition to the United States.

In a statement on Wednesday, Canada’s justice ministry said Meng was arrested in Vancouver on December 1.

“She is sought for extradition by the United States and a bail hearing has been set for Friday.”

The ministry added it could not provide further details because of a publication ban that was sought by Meng.

Canadian Prime Minister Justin Trudeau on Thursday said his government had no involvement in the arrest.

“The appropriate authorities took the decisions in this case without any political involvement or interference … we were advised by them with a few days’ notice that this was in the works,” Trudeau told reporters.

Asked whether he had spoken to the Chinese premier or the ambassador, Trudeau said he had no conversations with international counterparts about the case.

‘Legal rights’

People familiar with the matter told Reuters news agency in April that US authorities have been investigating Huawei – the world’s largest telecoms equipment maker – since at least 2016 for allegedly shipping US-origin products to Iran and other countries in violation of US export and sanctions laws.

Huawei is also under intense scrutiny from Washington and other Western governments over its ties to the Chinese government, driven by concerns it could be used by Beijing for spying. It has been locked out of the US and some other telecom equipment markets. Huawei has repeatedly insisted Beijing has no influence over it.

Lu Xiang, an expert on China-US relations at the state-backed Chinese Academy of Social Sciences, called Meng’s arrest “extremely shocking”.

“If someone from the United States is hoping to use threats to an individual’s personal safety in order to add weight in the talks, then they have most certainly miscalculated,” he said.

Jia Wenshan, a professor at Chapman University in California, said the arrest “runs a huge risk of derailing the US-China trade talks”.

China urged Canada and the US to “clarify” the reason for Meng’s arrest and demanded her release.

“We have made solemn representations to Canada and the US, demanding that both parties immediately clarify the reasons for the detention, and immediately release the detainee to protect the person’s legal rights,” foreign ministry spokesperson Geng Shuang told reporters.

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Huawei, which generated $93bn in revenue last year, confirmed the arrest.

It said in a statement it was unaware of any wrongdoing by its executive, adding that it complies with all applicable laws.

“The company has been provided very little information regarding the charges and is not aware of any wrongdoing by Ms Meng,” it said.

‘Sense of angst’

After rallying on Monday following the US-China ceasefire on tariffs announced over the weekend, US markets fell sharply on Tuesday amid scepticism about the agreement.

US markets were closed on Wednesday because of the funeral of former president George HW Bush but resumed their downward trend on Thursday following the Meng arrest.

The arrest “has fueled a heightened sense of angst that it will potentially stand in the way of the US and China reaching a trade deal within their prescribed 90-day window”, said Briefing.com analyst Patrick O’Hare.

“Moreover, it has piqued worries that China could take some retaliatory action in the interim against US companies doing business in China,” said O’Hare.

But Arthur Kroeber, founder of Gavekal Dragonomics, said Beijing was unlikely to retaliate against the US business community in China because its interests have partly overlapped with China’s in the trade war, giving Beijing some leverage.

The probe of Huawei is similar to one that threatened the survival of China’s ZTE Corp, which pleaded guilty in 2017 to violating US laws that restrict the sale of American-made technology to Iran in efforts to curb Tehran’s missile and nuclear programmes.