TheChek News Flow

Just when investors were hoping to take a breather following the weekend’s trade truce between the U.S. and China, the arrest of Chinese telecom-equipment company Huawei’s chief financial officer at the behest of the American authorities has served a warning that they shouldn’t get too complacent.

Sabrina Meng, who is also the daughter and potential successor of Huawei’s founder Ren Zhengfei, was arrested Saturday in Canada in connection with the company’s alleged violation of Iran sanctions. It is unclear what evidence the U.S. authorities have or whether Washington plans to take further action against Huawei. The company said it isn’t aware of any wrongdoing by Ms. Meng.

The incident’s timing may be curious. But Huawei, the world’s top cellular-equipment maker, encapsulates the conflict between the two countries.

Beijing champions the company as one of China’s few truly global brands, and its best bet to dominate the build-out of the next-generation wireless network called 5G. But in Washington, Huawei has long been a boogeyman, with myriad accusations against it including spying and cyber theft. The U.S. has effectively barred major carriers from using Huawei and has launched a campaign to persuade its allies to do the same. Australia, New Zealand and Britain’s BT Group have heeded the call so far.

What happened to ZTE, Huawei’s Chinese peer, could offer a taste of what comes next. The Trump administration banned American companies from selling to ZTE in April due to its violations of sanctions against Iran and North Korea, a move that could have killed the company given the difficulty of sourcing crucial components from elsewhere. The U.S. later lifted the restriction, but ZTE’s Hong Kong-listed stock is still around 40% lower than where it traded before the ban. Huawei isn’t listed, but its suppliers in Asia are already taking a hit: Lens-maker Sunny Optical dropped 5% Thursday while optical-component manufacturer Accelink Technologies fell 8%, with investors assuming more moves against Huawei are coming.

The bad news could now spread to small American suppliers to Huawei. Optical component maker Neophotonics, for example, generates almost half its revenue from the Chinese company, according to Goldman Sachs. Other U.S.-listed companies such as Lumentum, Oclaro, Qorvo and Finisar have around 10% of their revenue tied to Huawei, the bank estimates.

Bigger players could get hit too. Chip makers Qualcomm and Broadcom , which are already grappling with the global smartphone sales slowdown, are the most likely victims. While both generate only around 5%-6% of annual revenue from Huawei directly, that number rises to over 50% when broadened to all Chinese companies.

No matter which country wins the technological battle in the end, those companies that have hitherto benefited from more cordial relationship between the U.S. and China will be the biggest losers.

- EU Court ruling to be on the reversibility of Article 50

- Case includes some Scottish politicians

- China and US have reached a high level of consensus; confident that a trade deal could be reached in 90 days

Asian stocks slumped with U.S. futures, the Treasury yield curve edged closer toward inversion and the yen climbed on Thursday as the investor aversion to risk that’s been prevalent for much of the quarter wore on.

Losses deepened in afternoon trading, with the MSCI Asia Pacific Index seeing its worst three-day drop since October. Hong Kong shares slid almost 3 percent after the arrest of the chief financial officer of China tech giant Huawei Technologies Co. reignited concerns about U.S.-China tensions. The yuan dropped the most since October. Oil fell toward $52 a barrel in New York. Yields on 10-year Treasuries dipped below 2.9 percent, bringing them all the nearer to two-year rates and underscoring worries about rising risks of recession -- given the history of inversions preceding downturns.

Nikkei -1.91% Hang Seng -2.94% CSI -2% Shanghai -1.54% Shenzen -1.90%

Eur$ 1.1330 CNH 6.8918 CNY 6.8860 JPY 112.86 GBP 1.2714 CHF 0.9973 RUB 66.72 TRY 5.36545 WTI$ 52.25 -1.21%

S&P -1.20% EuroStoxx -1.24% FTSE -1.04% Dax -1.29% SMI -0.81%