LONDON MARKETS: FTSE 100 Drops As U.S.-China Trade Fight Intensifies
19 Juni 2018 - 12:12PM
Dow Jones News
By Carla Mozee, MarketWatch
Miners fall on worries about metals demand from China
U.K. stocks dropped Tuesday, with trade tensions between the
world's two largest economies escalating after U.S. President
Donald Trump ordered his administration to look for further tariffs
on $200 billion in imported goods from China.
How markets are moving
The FTSE 100 index lost 0.8% to 7,573.72, on track for a third
straight decline. The basic materials group fell by the most, and
the consumer goods group was the only sector to advance. On Monday,
the London benchmark slipped less than 0.1%
(http://www.marketwatch.com/story/uk-stocks-fall-as-trade-conflict-spooks-traders-2018-06-18).
The pound slipped to $1.3188, breaking below $1.3200 for the
first time since November 2017, according to FactSet data. Sterling
traded at $1.3245 late Monday in New York.
What's driving markets
Stocks in the U.K. and the broader European equity market moved
sharply lower after Asian equities sold off. The Shanghai Composite
slid 3.8%, and the Shenzhen index tanked 5.8% in Asian trade, with
losses coming after Trump threatened more tariffs on more Chinese
goods
(http://www.marketwatch.com/story/trump-seeks-additional-200-billion-in-tariffs-against-china-and-threatens-even-more-2018-06-18).
U.S. stock futures were under heavy pressure before Wall Street's
open, with Dow futures down more than 350 points.
"Further action must be taken to encourage China to change its
unfair practices, open its market to United States goods, and
accept a more balanced trade relationship," Trump said in a
statement late Monday.
Beijing, meanwhile, is threatening to impose tariffs on another
batch of U.S. products
(http://www.marketwatch.com/story/china-threatens-further-tariffs-on-us-products-as-trade-conflict-escalates-2018-06-19)
if the Trump administration follows through with a second round of
levies, state-run Xinhua News Agency reported.
China had previously announced plans for retaliatory tariffs on
U.S. goods worth $34 billion, including soybeans, whiskey and
electric cars.
What are strategists saying?
"So far the trade war has been confined to trade. The fear,
however, is that it may spill over into the financial world.
Specifically, China could start selling off some of its massive
holdings of Treasury bonds. The country owns some $1.18 trillion of
Treasuries, or 30% of all foreign official holdings of Treasuries,
which is not to mention their holdings of agency bonds and others,"
said Marshall Gittler, chief strategist at ACLS Global, in a
note.
"Of course, to some degree it would be shooting themselves in
the foot to sell these bonds aggressively, because once the market
realized what was happening, bond prices would plunge. However,
U.S. mortgage rates would soar as a result, and China might feel
the pain was worth it to make middle-class U.S. voters sit up and
take notice," Gittler said.
Read:Trump's constant threats, reversals spur investors to see
him as the boy who cried 'Wolf!'
(http://www.marketwatch.com/story/trumps-constant-threats-and-reversals-spur-investors-to-see-him-as-boy-who-cried-wolf-2018-06-04)
Stock movers
Mining stocks were dragged lower, as analysts have said a trade
war could lead to reduced demand for industrial and precious
metals, and China is the world's largest buyer of copper.
Shares of copper producer Antofagasta PLC (ANTO.LN) fell 1.8%,
iron ore producers BHP Billiton PLC (BLT.LN) and Rio Tinto PLC
(RIO.LN) shed 2.8% and 2.5%, respectively.
Mining stocks make up 87% of the basic materials sector on the
FTSE 100, and that sector carries a more than 9% weighting on the
benchmark, according to FactSet data.
Off the FTSE 100, shares of Debenhams PLC (DEB.LN) slid 7.2%. On
Tuesday, the department-store chain warned that it expects fiscal
2018 pretax profit to miss expectations
(http://www.marketwatch.com/story/debenhams-warns-on-full-year-profit-2018-06-19)
as it faces increased competitor discounting and weakness in key
markets.
(END) Dow Jones Newswires
June 19, 2018 05:57 ET (09:57 GMT)
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