The news came as Washington and Beijing begin three months of negotiations aimed at de-escalating their bruising trade war, which is adding to global investors' worries over rising U.S. interest rates and other risks to global economic growth.
The losses in the first few minutes of trading might have been even steeper, but CME Group's Chicago Mercantile Exchange implemented a series of 10-second trading halts that helped limit the initial drop. Japan's Nikkei slid 1.7 percent, 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 fell 1.2 percent . Hong Kong's Hang Seng dropped 2.1 percent while Shanghai shares dropped 0.9 percent.
Canadian authorities said they had arrested Huawei's global chief financial officer in Vancouver, where she is facing extradition to the United States.
The arrest is related to violations of U.S. sanctions, a person familiar with the matter said, though officials have so far stayed mum on her allegations.
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 said on Wednesday 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.
Markets had initially brightened after U.S. and Chinese leaders agreed a temporary trade truce at a meeting on Saturday. But the mood has quickly soured on scepticism that the two sides can reach a substantive deal on a host of highly divisive issues within the tight 90-day timeframe set out.
The benchmark Treasury 10-year yield fell 1.7 basis points to 2.906 percent, near Tuesday's three-month low of 2.885 percent. U.S. markets were closed on Wednesday to mark the death of former President George H.W. Bush.
The yield curve remained inverted between two and five year zones, with five-year notes yielding 2.782 percent, below 2.795 percent on two-year notes.
"Worries about a U.S. economic slowdown are deepening as housing and other interest rates-sensitive sectors seem to have been hit," said Shuji Shirota, head of macro economic strategy at HSBC.
"If the upcoming U.S. jobs data on Friday shows some weakness, markets will face a major challenge," he added.
A monitoring committee of OPEC and its allies, including Russia, agreed on the need to cut oil output in 2019, two sources familiar with the discussions said.
Still, lack of details could suggest such an agreement could be elusive, some analysts also said.
U.S. West Texas Intermediate (WTI) crude futures were at $52.57 per barrel at 0109 GMT, down 32 cents, or 0.6 percent, from their last close. International Brent crude oil futures were down 17 cents, or 0.3 percent, at $61.39 per barrel.
(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)