* European stocks hit 2-year low after Asia hammered
* Arrest of Huawei CFO seen heightening U.S-China tension
* U.S. stock futures down 1.3 pct, Nikkei ends at five-week low
* Adds to investor worries over trade outlook, global growth
* Oil down ahead of key OPEC producers meeting
* Graphic: World FX rates in 2018 tmsnrt.rs/2egbfVh
By Marc Jones
LONDON, Dec 6 (Reuters) - Global stock markets slumped for a third day running on Thursday as the arrest of a top executive of Chinese tech giant Huawei in Canada for extradition to the United States fed fears of fresh tensions between the two economic superpowers.
The arrest of Huawei’s chief financial officer Meng Wanzhouof, who is also the daughter of the firm’s founder, triggered renewed fireworks coming just as Washington and Beijing prepare for crucial trade negotiations.
Asian markets took a beating. Huawei is not listed but China’s second-largest telecom equipment maker ZTE Corp sank 9 percent in Hong Kong while most of the nearby national bourses lost at least 2 percent.
Europe slumped too in early trading as 3 percent falls for the tech sector, miners and also carmakers kicked London , Frankfurt and Paris to two-year lows
“We had this very ugly new turn and just the degree to which the market has reacted just suggests to me that they are vulnerable right now,” said Saxo Bank’s head of FX strategy John Hardy.
“It think we should all be very careful, it is not looking good, especially if the S&P 500 goes to new lows.”
Hardy said that U.S. President Donald Trump may try to send some reassuring tweets later. For the time being though S&P 500 futures were down almost 2 percent.
The losses might have been even steeper had CME Group’s Chicago Mercantile Exchange not implemented a series of 10-second trading halts in Asia that had limited the initial drop.
Japan’s Nikkei shed 1.9 percent, closing at its lowest level since Oct. 30, with semi-conductor related shares leading the losses. Huawei is one of the world’s largest makers of smartphones and telecommunications network equipment.
MSCI’s ex-Japan Asia-Pacific index lost 2.0 percent too . Hong Kong’s Hang Seng dropped 2.5 percent while Chinese bluechips lost 2.1 percent to take their 2018 slump to 20 percent.
Saxo Bank’s Hardy highlighted that the Australian dollar, which is highly sensitive to trade tensions due to huge Aussie metals sales to China, had failed to lift after some reassuring comments from Beijing on the trade discussions.
It shed 0.6 percent against the U.S. dollar to $0.7229. The greenback itself fell as much 0.4 percent against the yen to 112.77 yen as it suffered slightly too.
The yuan eased 0.3 percent to 6.8835 per dollar in offshore trade, the euro barely budged at $1.1338 and the Canadian dollar languished near the 18-month low it had hit the previous day after cautious noises from the Bank of Canada.
On the Huawei drama, Canadian authorities had said they had arrested the firm’s CFO in Vancouver.
China’s foreign ministry said neither Canada and the United States had clarified their reason for the move but a source had earlier told Reuters it was related to violations of U.S. sanctions on Iran.
The arrest heightened the sense of a major collision between the world’s two largest economic powers not just over tariffs but also over technological hegemony.
Britain’s BT Group said it was removing Huawei’s equipment from the core of its existing 3G and 4G mobile operations. Australia and New Zealand have also rejected Huawei’s products.
“The U.S. has been telling its allies not to use Huawei products for security reasons and is likely to continue to put pressure on its allies,” said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities.
“So while there was a brief moment of optimism after the weekend U.S.-China talks but the reality is, it won’t be that easy,” he said.
Traders were also waiting to hear from Vienna about what kind of cuts OPEC and other oil producers like Russia could make to their output.
Consensus among analysts is for somewhere between 1-1.3 million barrels per day, and Brent dived back below $60 a barrel as Saudi Arabia’s energy minister said going into the day long meeting that 1 million “would be enough”
Yields on top-rated German government bonds held near six-month lows in risk off environment, while those on benchmark 10-year U.S. Treasuries were near a three-month low at 2.886 percent.
Adding to worries about U.S. recession risks, the Treasury yield curve remained inverted between two- and five-year zones, with five-year notes yielding 2.763 percent, below 2.778 percent on two-year notes.
U.S. jobs data is due on Friday. If the figures show any sign of serious weakness, markets are likely to react HSBC’s head of macro economic strategy, Shuji Shirota, said. (Reporting by Marc Jones; Editing by Toby Chopra)