US firms will also lose revenue by cutting Huawei as a customer. File Photo: IOL

INTERNATIONAL – Wall Street closed lower as the fallout from Huawei dragged down tech stocks. 

The Nasdaq plummeted 1.7 percent on Monday as the crackdown on China’s largest telecommunications and electronic equipment maker pressured the US technology sector. US chipmakers tumbled as investors acknowledged the collateral damage. US firms will also lose revenue by cutting Huawei as a customer.

Google-owner Alphabet closed the session 2 percent lower after following the White House’s orders to cut ties with the Chinese tech giant. The likes of Intel, Qualcomm ad Broadcom also announced that they would not supply Huawei until further notice so their share prices also tanked.

Stocks higher on Trump’s temporary reprieve

In an attempt to control the damage done to US stocks, Trump overnight announced that the US Commerce Department would allow Huawei to purchase American made goods for the next three months. This is an attempt to maintain existing networks and to keep updates to existing Huawei handsets. The grace period will allow US firms the space to determine longer term measures that currently rely on Huawei equipment for critical services.

This latest move by Trump shows just how haphazard his policies are and also how pervasive Huawei goods and technology are. Yesterday was a big reality check for Trump and shows the incomplete information available for his decision. This won’t be a one-day event. Huawei is entrenched on so many parts of the tech sector, this could take days or weeks to untangle.

Asian markets traded mixed, whilst European and US futures moved higher.

Oil gains on Middle East tensions

Oil was on the ascent in early trade on Tuesday hitting a high of $63.60. Escalating tensions between the US and Iran, in addition to signs that OPEC will continue its production cut drove oil higher. A threat that the US would attack Iran with great force if it attacked US interests in the Middle East has stoked tensions between the two nations further. The risk premium is being reflected in the price of oil; a market, which is already tight as OPEC producers continue with limits on production.

Pound steady ahead of cabinet meeting

The pound is hovering above $1.27 heading towards the European open but is likelt to come under further pressure today. Theresa May is expected to face a showdown with her cabinet as she seeks their back for a final push for her Brexit agreement. Theresa May’s changes to the deal centre around a close customs relationship to the European Union and are expected to infuriate the pro-Brexit ministers looking to succeed the PM.

Pound traders are growing increasingly concerned that a no deal Brexit could be a real possibility once again. Sterling fell 2 percent across the previous week.