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Investigation into Huawei adds to US-Chinese trade tensions

The US-Chinese trade tensions are likely to escalate following the arrest of Huawei's CFO while the UK economy will be in the spotlight as the House of Commons continues to debate the Brexit deal on the table.

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Asian equities and US stock futures fell overnight after news reports Canada arrested the chief financial officer (CFO) of Huawei in response to extradition requests from the US.

The New York Times reported that US departments of commerce and treasury had subpoenaed the Chinese telecommunications equipment company over suspected violations of sanctions against Iran and North Korea.

The arrest comes just days after US President Donald Trump’s dinner with his Chinese counterpart Xi Jinping at the G20 summit in Argentina, reigniting concerns over future US-Chinese trade relations.

In the UK, IHS Markit’s services Purchasing Managers’ Index (PMI) – an indicator of the health of the British economy – released yesterday, 5 December dropped sharply from 52.2 in October to 50.4 last month. A figure above 50 indicates expansion and below 50 – contraction.

The services sector makes up 76 per cent of the UK economy and such a sharp slowdown suggests that Brexit fears are taking their toll, with GDP growth numbers likely to be slashed for the final quarter of 2018.

The British economy will also take centre stage today as the Brexit debate in the House of Commons continues, which will put the Pound under further pressure.

Meanwhile, the US will release a swathe of financial data. First, Automatic Data Processing (ADP) will publish employment data at 13:15 (GMT), followed by US PMI data at 15:00. Both sets of data demonstrate confidence in the US economy and are likely to reveal the effects of the US-Chinese trade tensions and their potential to lead to a slowdown.

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