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LONDON — World stocks steadied on Tuesday after three sessions of losses, thanks to strong earnings from the likes of Google and as a rise in benchmark US bond yields towards 3 per cent stalled, while oil prices stretched to fresh highs above $75 a barrel. 

US stock futures pointed to a firm open on Wall Street, although European shares were mixed with stock markets in London and Frankfurt around 0.3 per cent higher and shares in Paris flat.

Markets brushed off further signs that European powerhouse economy Germany is losing some of its momentum, with the Ifo business climate index falling in April.

In Asia, Japan's Nikkei added 0.9 per cent as a lower yen supported export-heavy firms and Chinese shares posted their strongest gains in two months.

That left MSCI's world equity index a tad higher after three days of declines.

The recovery in stocks came as bond markets also bounced back from a selloff. US ten-year Treasury yields came within striking distance of the psychologically significant barrier of 3 per cent on Monday, which in the past has triggered market spasms.

"There's a tug and a pull from all kinds of things in equity markets right now, such as the approach of US bond yields to 3 per cent, but I don't think that would be the end of the world," said Lukas Daalder, chief investment officer at Robeco.

Earnings meanwhile, especially from the tech sector, were in focus after a turbulent few months for leading US tech firms.

Google parent Alphabet was up slightly in volatile after-hours trading on Monday after the tech giant reported a 73 per cent jump in profits in the first quarter. 

Chipmaker AMS reported first-quarter sales towards the lower end of its guidance range on Monday, and warned of a downturn owing to weaker orders from one of its main customers.

AMS did not name the customer, but the Austrian company is a big supplier to Apple, making components for the iPhone.

SAP, Europe's largest tech company by stock market valuation, meanwhile announced upbeat results in the seasonally tough first quarter.

Of around 18 per cent of the companies in the S&P 500 that have already reported, 78.2 per cent beat consensus estimates. 

Oil Surge 

Brent crude oil prices, the global benchmark, rose above $75 a barrel to their highest level since November 2014, supported by OPEC-led production cuts, strong demand and the prospect of renewed US sanctions on Iran.

US West Texas Intermediate crude futures were 0.5 per cent higher at $69.11 a barrel.

A rally in oil prices and renewed focus on the inflation outlook has added to upward pressure on bond yields recently. 

"It is this move higher in crude oil prices, along with the rise in demand, that is helping fuel the recent rise in yields as well as the positive tone for equity markets," said Michael Hewson, chief market analyst at CMC Markets in London. 

"However if it continues too far we could start to see it act as a drag on equity markets, if prices along with yields start to move even higher."

All about bonds

The fallout from rising US bond yields, which have helped lift US financial stocks, continued to be felt in currency markets.

The euro nursed losses at a two-month low on growing concerns that firmer Treasury yields would reduce incremental demand for the region's bonds and stocks at a time when hedge funds have amassed record long bets on the single currency.

The euro fell to a two-month low as concerns that rising US Treasury yields would push the currency to break below a range it has been stuck within most of this year, prompting hedge funds to unwind some of their record long bets.

It stabilised around $1.22 on Tuesday after having slumped to $1.22 in Asia, its lowest since March 1. 

The dollar set a two-month high of 108.87 yen and was holding near those levels.

Elsewhere, aluminium hit its lowest in nearly two weeks, extending declines from the previous day after Washington gave US companies more time to comply with sanctions on Russian producer Rusal and hinted at further sanctions relief.

YEREVAN — Armenian prime minister Serzh Sargsyan said on Monday he was resigning to help safeguard civic peace, following almost two weeks of mass street protests that have plunged the impoverished ex-Soviet republic into political crisis. 

Sargsyan, a close ally of Russian President Vladimir Putin, had served as Armenia's president for a decade until this month and had faced accusations of clinging to power when parliament elected him as prime minister last week.

Under a revised constitution, the prime minister now holds most power in the tiny southern Caucasus nation, while the presidency has become largely ceremonial.

Pressure on the 63-year-old to quit had increased sharply on Monday when unarmed soldiers in the capital Yerevan joined the anti-government protests, which first erupted on April 13.

Though peaceful, the tumult has threatened to destabilise Armenia, a key Russian ally in a volatile region riven by its decades-long, low-level conflict with Azerbaijan. Moscow, which has two military bases in Armenia, was closely watching events.

"I got it wrong," Sargsyan said in a statement issued by his office. 

"In the current situation there are several solutions, but I won't choose any of them. It's not my style. I am quitting the country's leadership and the post of prime minister of Armenia."

He said he was bowing to protesters' demands and wanted his country to remain peaceful.

Armenia's 2025 dollar-denominated bond fell 0.83 cents after Sargsyan said he would resign, hitting a one-year low. 

Former Armenian prime minister Karen Karapetyan, an ally of Sargsyan from his ruling pro-Russian Republican Party, was named as acting prime minister, Russia's RIA news agency reported, citing the Armenian government's press office.

Armenia's political parties in parliament now have seven days to put forward the name of a new prime minister.

Sargsyan's allies remain in key positions in the government and it remains unclear whether his resignation will herald any real change. 

Celebrations

Protesters loudly celebrated Sargsyan's resignation.

Some hugged policemen in the street amid repeated cries of "Hurrah!", others beeped car horns, and some residents of Yerevan were even seen dancing outside. 

The protests which toppled Sargsyan lasted for 11 days and saw tens of thousands of protesters march through Yerevan and other towns, blocking streets and staging sit-ins that disrupted daily life.

On Sunday, police had detained three opposition leaders and nearly 200 protesters, drawing a rebuke from the European Union. Police released Nikol Pashinyan, a lawmaker regarded as the main opposition leader, on Monday.

Asked about the crisis on Monday before Sargsyan's resignation, the Kremlin called Armenia an "extraordinarily important country" for Russia, but dismissed the idea it might intervene, calling the crisis a domestic matter.

Last week, Putin rang Sargsyan to congratulate him on becoming premier. As president, Sargsyan took Armenia, a country of about 3 million people, into a Russia-backed economic bloc and bought weapons from Moscow.

The protesters' complaints were mainly domestic and focused on pervasive corruption and poverty in a country that won independence from Moscow in 1991 but has been hampered by its conflict with Azerbaijan over the breakaway region of Nagorno-Karabakh and other issues. 

But critics have also accused Sargsyan of moving landlocked Armenia too close to Russia at the expense of better ties with the West and increased prosperity, and it was unclear whether his political demise could lead to a change in foreign policy.

In what may have been a turning point in the protests, soldiers wearing military uniforms marched through Yerevan on Monday morning with the protesters.

Images broadcast on the Internet and social media showed the soldiers hugging protesters and waving the country's national flag, a development the Armenian defence ministry condemned as illegal and promised to harshly punish.

Opposition leader Pashinyan had told Sargsyan that his time was up in a tense meeting on Sunday.

"The situation in Armenia has changed, you don't have the power of which you are told," he had told him. "In Armenia, the power has passed to the people."

BRUSSELS — EU anti-trust regulators on Monday opened an in-depth probe to establish whether a massive rescue loan by the Italian government to troubled airline Alitalia constituted illegal state aid.

The salvo from Brussels targets a 900 million euro ($1.1 billion) bridge loan by Rome to keep Alitalia afloat after staff in 2017 rejected a last-ditch cost-cutting plan to save the company.

"The EU Commission has a duty to make sure that loans given to companies by member states are in line with the EU rules on state aid," said EU Competition Commissioner Margrethe Vestager.

"We will investigate whether this is the case for Alitalia," she said.

Under EU state aid rules, public interventions to troubled companies must be made under terms equivalent to market conditions.

The EU said it had received "a number of complaints" in 2017 alleging that the loan to Alitalia did not meet the criteria and would dig deeper to establish an opinion.

The probe comes just days after three rivals officially bid to take the reins of Alitalia, just the latest of former flagship carriers to be sold off to bigger groups in Europe.

An Italian government minister said Germany's Lufthansa emerged as the number one candidate to take over Alitalia, which is now partly owned by the UAE carrier Etihad Airways.

Britain's budget airline EasyJet and Hungarian carrier Wizz Air are also reported to be in the bidding.

The fate of Alitalia is complicated still further by March's inconclusive general election in Italy, from which no new government has, yet, been formed.

The deadline for the sale of Alitalia was originally set for the end of this month, but the government will issue a decree in the coming weeks pushing back that deadline by around six months.

LONDON - The European Union has indicated that it is willing to provide some form of access for Britain's vast financial services industry after Brexit, the City minister John Glen said on Monday.

Glen said the transition deal agreed by Britain and the EU last month allows financial firms to move forward and plan for the future with confidence.

"The fog is clearing ... We are already seeing progress," Glen told the CityWeek conference in the Square Mile's Guildhall. "The EU have now recognised that there will be some form of market access in financial services having previously dismissed the idea."

Britain's vast financial services looks set to be one of the most divisive areas in the Brexit negotiations, with Britain demanding a generous deal while the EU refuses to shift from its insistence that Britain's red lines -- such as ending the free movement of workers from the EU -- make that impossible.

Britain has proposed a future trade deal with the bloc for financial services based on mutual recognition of each other's regulation. This model would be maintained by close co-operation between regulators and financial policymakers.

But so far EU policymakers have so far rejected the idea, saying it has never been done before on such a scale.

Catherine McGuinness, policy chief for the City of London, home to the Square Mile financial district, said mutual recognition is the "only game in town".

The alternative is a one-sided system whereby the bloc grants market access if a foreign country's rules are fully aligned with its own. Such access can also be terminated by Brussels at short notice.

Anthony Belchambers, chairman of Saxo Capital Markets, said there is still a question of whether the EU has the political will to agree to mutual recognition.

Market access will involve accepting EU rules to some extent, a step pro-Brexit lawmakers in Britain dismiss.

"The reality is if you want access, it's going to come at a price. You have to be rational about all this," Belchambers said.

Meanwhile, banks, insurers and asset managers are already moving staff to new hubs in the EU to be sure of maintaining links with customers there, regardless of what is agreed in trading terms.

Some EU policymakers fear that Britain will ease rules for banks in a bid to keep London as a dominant global financial centre after Britain leaves the EU next March.

Glen dismissed talk of a "race to the bottom", a move that would make it much harder for Britain to secure access to the EU's financial market.

"We do not intend to rip up the rulebook after Brexit," he said.

WASHINGTON  — The World Bank's shareholders on Saturday endorsed a $13 billion paid-in capital increase that will boost China's shareholding but bring lending reforms that will raise borrowing costs for higher-middle-income countries, including China.

The multilateral lender said the plan would allow it to lift the group's overall lending to nearly $80 billion in fiscal 2019 from about $59 billion last year and to an average of about $100 billion annually through 2030.

"We have more than doubled the capacity of the World Bank Group," the institution's president, Jim Yong Kim, told reporters during the International Monetary Fund and World Bank Spring meetings in Washington.

"It's a huge vote of confidence, but the expectations are enormous."

The hard-fought capital hike, initially resisted by the Trump administration, will add $7.5 billion paid-in capital for the World Bank's main concessional lending arm, the International Bank for Reconstruction and Development (IBRD).

Its commercial-terms lender, the International Finance Corp. (IFC), will get $5.5 billion paid-in capital, while the IBRD will get a $52.6 billion increase in callable capital.

Lending reforms 

The bank agreed to change IBRD's lending rules to charge higher rates for developing countries with higher incomes, to discourage them from excessive borrowing.

IBRD previously had charged similar rates for all borrowers, and US Treasury officials had complained that it was lending too much to China and other bigger emerging markets.

US Treasury Secretary Steven Mnuchin said earlier on Saturday that he supported the capital hike due to the reforms that it included. The last World Bank capital increase came in 2010. 

The current hike comes with cost controls and salary restrictions that will hold World Bank compensation to "a little below average" for the financial sector, Kim said. 

He added that there was nothing specific in the agreement that targeted a China lending reduction, but he said lending to China was expected to gradually decline.

In 2015, China founded the Asian Infrastructure Investment Bank, and lends heavily to developing countries through its government export banks.

The agreement will lift China's shareholding in IBRD to 6.01 per cent from 4.68 per cent, while the US share would dip slightly to 16.77 per cent from 16.89 per cent. Washington will still keep its veto power over IBRD and IFC decisions.

Kim said the increase was expected to become fully effective by the time the World Bank's new fiscal year starts on July 1. Countries will have up to eight years to pay for the capital increase.

The US contribution is subject to approval by Congress. 

WASHINGTON — Trade tensions between the United States and China, which threaten to spill over into the global economy, are dominating a gathering of world finance officials even as the Group of 20 (G-20) avoided the topic on Friday.

Official after official has called for disputes to be resolved through dialogue rather than unilateral tariffs, and warned about the threat to the economic recovery.

French Economy Minister Bruno Le Maire criticised what he called a "vain and pointless" spat with China.

"We run the risk of trade war. We run the risk of multilateral order breaking down that is good for no one, and most definitely not for the world economy and growth," Le Maire told reporters during the Spring meetings of the International Monetary Fund (IMF).

But US President Donald Trump's top finance official said the fault lies with countries that employ unfair trade policies.

"We strongly believe that unfair global trade practices impede stronger US and global growth, acting as a persistent drag on the global economy," US Treasury Secretary Steven Mnuchin said in a statement to the IMF.

While IMF chief Christine Lagarde has offered the fund as a forum to resolve differences, Mnuchin instead said the IMF "should be a strong voice" in urging members "to dismantle trade and non-tariff barriers and to protect intellectual property rights".

Le Maire agreed China must respect the rules, but said the country is a key part of the world trading system.

"We must redefine international trade with China, not against China."

Theft of American intellectual property and technology has been a key irritant in the dispute with Beijing, which prompted President Donald Trump to announce steep tariffs on tens of billions of dollars' worth of Chinese goods, on top of last month's punitive duties on steel that were primarily targeted at China as well.

Washington and Beijing have traded tariff threats and also filed complaints against each other at the World Trade Organisation (WTO).

WTO Director Roberto Azevedo warned that the effects of a major escalation "could be serious", and poor countries would be the collateral damage.

"A breakdown in trade relations among major players could derail the recovery that we have seen in recent years, threatening the ongoing economic expansion and putting many jobs at risk," he said in a statement to the meetings.

The IMF has highlighted the trade tensions as a major downside risk to the otherwise solid global recovery, and Lagarde said the dispute undermines confidence and creates uncertainty that could choke off investment which has been a prime engine of the global recovery.

The WTO projects global merchandise trade will expand by 4.4 per cent this year, after increasing by 4.7 per cent in 2017.

 Despite the intense focus on the US-China dispute, the G-20 finance ministers, from the world's major economies, avoided discussion of the issue on Friday, even while acknowledging the potential danger it posed to the global economy.

"We didn't have a discussion on specific measures on trade," Argentine Treasury Minister Nicolas Dujovne told reporters after the meeting. "The G-20 is not the place to discuss specific measures. That's the WTO."

It was a surprising omission for the group that was key to shepherding the global economy through the 2008 financial crisis and preventing another depression.

But Dujovne said, "We have to also recognise the limitations that we as a group have... and try to find a consensus even if the consensus is more limited than we want."

The ministers did express concern over the growth of "inward looking policies", he said, using a frequent euphemism for trade protectionism.

But German central bank chief Jens Weidmann said the G-20 officials all agreed trade must benefit all countries.

"Protectionism, not to mention a trade war, is certainly not the solution."

Le Maire repeated his criticism of the US tariffs on steel and aluminum which were aimed at China but only spared the EU and other key trading partners under a temporary exemption that is due to expire May 1.

As close allies in the EU "we expect not only temporary exemption but a full and permanent exemption", he said.

"We cannot live with a kind of sword of Damocles hanging over our heads."

LONDON — Oil surged on Thursday close to 3.5-year peaks on simmering Mideast tensions and keen US demand, while London stocks rose with drugmaker Shire boosted by a takeover move.

World oil prices extended Wednesday's gains on the back of data showing a drop in US stockpiles — indicating improved demand — and expectations that a Russia-OPEC output cap deal will be kept in place.

The market was also propelled after OPEC kingpin reportedly stated it wanted crude prices to top $80 per barrel as it prepares for a gigantic listing of part of its state oil company. Tensions in the oil-rich Middle East also kept prices elevated.

"Saudi Arabia still calls the shots on global oil markets, and it is increasingly obvious the Saudis are comfortable with oil at $80 or more," said Interactive Investor analyst Lee Wild.

"Add a drop in weekly US oil reserves to the mix and the only way for crude prices is up."

Oil surged to summits last seen in November 2014, with London Brent striking $74.74 per barrel and New York crude touching $69.56.

European equity markets, meanwhile, diverged amid lingering fears over Syria and a possible China-US trade war, but London edged 0.04 per cent higher despite news of sliding March retail sales.

Wall Street opened lower, with the Dow dropping 0.2 per cent in the first minute of trading.

The British capital's benchmark FTSE 100 index was given an early shot in the arm from media reports, later confirmed, that Japan's Takeda Pharmaceuticals was making a takeover move on Shire.

Shire, which is based in Ireland and listed on the London stock market, saw its share price rocket more than 10 per cent higher.

It gave up much of those gains after Takeda confirmed it had made a takeover bid worth £42 billion ($60 billion), but that Shire had rejected the offer. 

Shire said it had rejected three offers from Takeda, and was still in discussions with the firm about "whether a further, more attractive, proposal may be forthcoming".

Asian markets enjoyed another day of gains Thursday as the region's energy firms also tracked a surge in oil prices.

Fresh hopes that Donald Trump and North Korea's leader Kim Jong-un will hold a historic summit within months also provided some much-needed optimism.

WASHINGTON — The International Monetary Fund (IMF) urged central banks on Wednesday to take a gradual and transparent approach to tightening monetary policy, warning that unexpected moves could shock the global economy.

The fund cautioned that investors and financial markets expect a steady approach to monetary tightening based on the belief inflation will remain relatively tame. 

But the IMF pointed to some fragilities in global finance after a lengthy period of easy money policies and low interest rates, including a flood of high-risk bonds, record-high debt levels and lofty prices for risky assets.

If conditions change abruptly that could even derail the economic recovery, the fund warned.

"Financial vulnerabilities, which have accumulated during years of extremely low rates and volatility, could make the road ahead bumpy and could put growth at risk," the IMF said in its Global Financial Stability Report, a twice-annual analysis.

For example, a sudden acceleration of inflation in the United States could lead the Federal Reserve to raise interest rates more quickly than currently expected.

Tobias Adrian, director for the IMF's Monetary and Capital Markets Department, acknowledged that uncertainty about inflation is currently "very low", but warned that markets could have an outsized reaction to any spike.

Other factors also could hit markets, including US-China trade tensions, which the IMF flagged as one of the most concerning risks to global recovery in a separate report released on Tuesday.

Adrian said talk of a US-China trade war had not so far significantly affected financial conditions, even as jitters sent global share prices lower.

"In recent weeks, discussions around trade have increased investor uncertainty and as a result financial conditions have tightened somewhat, but remain easy," he told reporters.

"What we are flagging is that at some point markets see shocks in inflation that raise inflation uncertainty and when that happens" rates could rise quickly and financial conditions would tighten, he said.

Emerging markets would be especially vulnerable to "spillovers" if that happens, the report cautioned. "Gradual and well-telegraphed" moves by advanced economy central banks have so far been favourable for emerging economies, but financial flows could fall by "at least one-quarter" if central banks mishandle the transition, the fund said.

The analysis is the latest to tackle the myriad policymaking challenges as the world moves towards ending a long period of low interest rates and monetary stimulus enacted after the 2008 financial crisis.

The US Federal Reserve has undertaken a series of interest rate hikes over the last two and a half years, and the European Central Bank has signaled it plans to soon end its stimulus programme.

While these moves are necessary, central banks should "maintain accommodation as needed" and raise rates in "a gradual and well-communicated manner", the fund said.

"Gradualism and clear communications are crucial given the confluence of still relatively low inflation, easy global financial conditions, and rising financial vulnerabilities," the report said.

WASHINGTON — The global economy is expected to grow at a solid pace through next year, boosted by faster expansion in the United States and Europe, but after that risks will build, the International Monetary Fund (IMF) said on Tuesday.

In the latest update to its World Economic Outlook, the IMF still predicts world growth of 3.9 per cent in 2018 and 2019, unchanged from January despite raised estimates for US and EU growth. 

That is an improvement on the 3.8 per cent global growth seen last year.

However, the Fund cautions that the growth "momentum is not assured", given trade tensions between the United States and China and the expected reversal of the positive effects from the US tax cuts.

IMF chief economist Maurice Obstfeld stressed that the trade conflict could damage the global economy if it broadens to affect other countries, and said even the prospect of a trade war could do harm.

"There's not going to be any winners coming out of a trade war," he told reporters, noting that the uncertainty alone could put a damper on investment.

While it is difficult to predict how things will play out, "I suspect if you keep poking at economic expansion it could turn around and bite you," Obstfeld warned.

The report notes that the sweeping US tax cuts approved in December will fuel higher growth only through next year, and after that will "subtract momentum".

The IMF raised its US forecast by two tenths for both years, to 2.9 per cent for 2018 and 2.7 per cent for 2019, which follows big upward revisions in the October report, due to the tax impact.

However, Obstfeld warned the stimulus was "largely temporary".

Because the US boost accounts for most of the higher world expansion, beyond 2019 "global growth is projected to gradually decline to 3.7 per cent by the end of the forecast horizon", the report said.

Risks to the downside 

The risks to the global economic outlook "clearly lean to the downside" beyond the next few quarters, the IMF warns. 

Like other advanced economies, the United States will max out growth and return to a more sluggish pace, "held back by aging populations and lackluster productivity".

Despite the fact increasing world trade helped boost growth in recent years, there has been a rise in public scepticism about the benefits, leading to a renegotiation of trade deals and increasing friction.

US President Donald Trump last month imposed steep tariffs on steel and aluminum imports and threatened to impose more on tens of billions of Chinese goods, prompting Beijing to slap duties on US goods like pork and sorghum and threaten even more sensitive US exports like soy.

"That major economies are flirting with trade war at a time of widespread economic expansion may seem paradoxical — especially when the expansion is so reliant on investment and trade," Obstfeld said. 

"Our strong message at this meeting is there is a multilateral system. Let's use it and proceed in a collaborative way rather than conflictive way."

IMF chief Christine Lagarde last week warned governments to "steer clear of protectionism in all its forms", saying the trade frictions hurt poor consumers the most as costs increase, and that they also undermined a system that had broadened prosperity worldwide.

Instead, the IMF argues that the United States and others should respond to anxiety about globalisation and technological advances by "strengthening growth, spreading its benefits more widely, [and] broadening economic opportunity through investments in people", Obstfeld said.

Rather than lower the trade deficit, as Trump has called for, the US trade actions could expand it by another $150 billion by 2019, according to the report.

Market disruption 

The fund warns that a worsening of trade conflict could have broader implications for global growth as well as market confidence.

The report cites the market turbulence in early February and into March amid the growing US-China trade dispute, when US stocks stumbled after surging to repeat records in the first weeks of 2018. The Dow had lost almost 10 per cent of its value by the end of March, down from the record 26,616.71 reached on January 26.

The rapid decline should "serve as a cautionary reminder that asset prices can correct rapidly and trigger potentially disruptive portfolio adjustments".

In other projections, the IMF upgraded the forecast for the euro area to 2.4 per cent for 2018, an upward revision of two tenths compared to the January estimate, as it raised its estimates for key members, especially Spain. But the forecast for 2019 was unchanged at 2 per cent.

Japan's growth is still seen at a sluggish 1.2 per cent this year, after a rare and large upgrade of five tenths in January, slowing to 0.9 per cent in 2019.

The forecasts for China and India, key drivers of global growth, were unchanged from January. China is expected to expand 6.6 per cent and 6.4 per cent this year and next, while India should grow 7.4 per cent and 7.8 per cent.

WASHINGTON — The US Department of Commerce is banning American companies from selling components to leading Chinese telecom equipment maker ZTE Corp. for seven years for violating the terms of a sanctions violation case, US officials said on Monday.

The Chinese company, a top smartphone seller in the United States, pleaded guilty last year in federal court in Texas for conspiring to violate US sanctions by illegally shipping US goods and technology to Iran. It paid $890 million in fines and penalties, with an additional penalty of $300 million that could be imposed.

As part of the agreement, Shenzhen-based ZTE Corp. promised to dismiss four senior employees and discipline 35 others by either reducing their bonuses or reprimanding them, senior Commerce Department officials told Reuters. But the Chinese company admitted in March that while it had fired the four senior employees, it had not disciplined or reduced bonuses to the 35 others.

ZTE "provided information back to us basically admitting that they had made these false statements", said a senior department official. "That was in response to the US asking for the information".

"We can't trust what they are telling us is truthful," the official said. "And in international commerce, truth is pretty important".

ZTE officials did not immediately respond to requests for comment.

Douglas Jacobson, an exports control lawyer who represents suppliers to ZTE, called the ban highly unusual and said it would severely affect the company. 

"This will be devastating to the company, given their reliance on US products and software," said Jacobson. "It's certainly going to make it very difficult for them to produce and will have a potentially significant short and long-term negative impact on the company."

"This is going to tank their stock," Jacobson added.

ZTE has sold handset devices to US mobile carriers AT&T Inc., T-Mobile US Inc. and Sprint Corp. It has relied on US companies, including Qualcomm Inc, Microsoft Corp. and Intel Corp. for components.

The US action against ZTE is likely to further exacerbate current tensions between Washington and Beijing over trade. After the US placed export restrictions on ZTE in 2016 for Iran sanctions violations, the China's Ministry of Commerce and Foreign Ministry criticised the decision.

A five-year federal investigation found last year that ZTE had conspired to evade US embargoes by buying US components, incorporating them into ZTE equipment and illegally shipping them to Iran.

ZTE, which devised elaborate schemes to hide the illegal activity, agreed to plead guilty after the Commerce Department took actions that threatened to cut off its global supply chain.

The US government had allowed the company continued access to the US market under the 2017 agreement. American companies are estimated to provide 25 per cent to 30 per cent of the components used in ZTE's equipment, which includes networking gear and smartphones.

The US government's investigation into sanctions violations by ZTE followed reports by Reuters in 2012 that the company had signed contracts to ship millions of dollars' worth of hardware and software from some of the best known US technology companies to Iran's largest telecoms carrier.