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Aug. 15, 2019, 7:09 a.m. EDT

British stocks stumble for second day on U.S.-China contagion fears

Surprisingly strong U.K. retail sales does little for equities

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By Steve Goldstein, MarketWatch


Getty Images
An aerial view taken in Voh, in North Province, New Caledonia shows the Koniambo Nickel SAS (KNS) metallurgical plant belonging to Glencore and Societe miniere du Sud Pacifique.

British stocks on Thursday crumbled on concerns over the global economy in the wake of the U.S.-China trade war, even as data showed Britain’s consumers have been resilient.

The U.K. FTSE 100 /zigman2/quotes/210598409/delayed UK:UKX +0.71%  tumbled 1.57% to 7035.30, with the oil majors and commodity producers weighing. Royal Dutch Shell /zigman2/quotes/206428183/delayed UK:RDSA +3.10%   and HSBC /zigman2/quotes/203901799/delayed UK:HSBA +0.47%  were among the 5 companies trading without the rights to the next dividend payment. Only a handful of stocks, mostly defensive names like United Utilities /zigman2/quotes/203908003/delayed UK:UU -0.30%  , were higher.

The mid-cap FTSE 250 /zigman2/quotes/210598417/delayed UK:MCX +0.39%  , which is more geared to the local economy, fell 0.8% to 18584.40.

What’s happening

In the wake of weak German and Chinese economy data, the U.S. yield curve inverted on Wednesday, with the 2-year yield rising above the 10-year yield — which has happened ahead of the last five recessions.

On Thursday, the yield curve uninverted — the 10-year yield /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y -0.04%  was once again higher than the 2-year /zigman2/quotes/211347045/realtime BX:TMUBMUSD02Y +5.10%  . Also, the 30-year yield /zigman2/quotes/211347052/realtime BX:TMUBMUSD30Y -0.16%  moved back above the key 2% level.

China’s threat to respond to U.S. tariffs wiped out early gains for U.S. stock futures /zigman2/quotes/209948968/delayed ES00 +0.16%  and also weighed on British equities. There’s a flurry of data to come: weekly jobless claims, retail sales and readings of manufacturing sentiment in New York and Philadelphia.

In the U.K., retail sales grew a surprisingly strong 3.3% in July compared to a year ago, demonstrating the resilience of the British consumer ahead of a possible abrupt exit from the European Union.

Focus stocks

Glencore /zigman2/quotes/201400686/delayed UK:GLEN +5.44%  fell 4.8% as J.P. Morgan cut the miner to underweight. “A bullish view on Glencore in 2019/20 is contingent on rising commodity prices in our view, yet trade-war risks have risen since new 10% tariffs were imposed and global recession risks are rising,” the broker said.

The Royal Bank of Scotland    shares fell 2.8%, a day after receiving brokerage downgrades from Macquarie and HSBC. The Macquarie downgrade said its returns on equity are under increasing pressure.

/zigman2/quotes/210598409/delayed
UK : FTSE UK
6,939.58
+49.09 +0.71%
Volume: 553,088
April 14, 2021 4:59p
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/zigman2/quotes/206428183/delayed
UK : U.K.: London
£ 1,438.40
+43.20 +3.10%
Volume: 3.21M
April 14, 2021 4:35p
P/E Ratio
N/A
Dividend Yield
0.04%
Market Cap
£106.19 billion
Rev. per Employee
£1.52M
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/zigman2/quotes/203901799/delayed
UK : U.K.: London
428.90 p
+2.00 +0.47%
Volume: 14.85M
April 14, 2021 4:35p
P/E Ratio
28.61
Dividend Yield
2.54%
Market Cap
£87.19 billion
Rev. per Employee
£257,711
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/zigman2/quotes/203908003/delayed
UK : U.K.: London
944.00 p
-2.80 -0.30%
Volume: 1.47M
April 14, 2021 4:35p
P/E Ratio
58.60
Dividend Yield
4.53%
Market Cap
£6.46 billion
Rev. per Employee
£337,748
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/zigman2/quotes/210598417/delayed
UK : FTSE UK
22,355.45
+86.99 +0.39%
Volume: 275,842
April 14, 2021 4:59p
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/zigman2/quotes/211347051/realtime
add Add to watchlist BX:TMUBMUSD10Y
BX : Tullett Prebon
1.63
-0.0007 -0.04%
Volume: 0.00
April 15, 2021 12:51a
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/zigman2/quotes/211347045/realtime
add Add to watchlist BX:TMUBMUSD02Y
BX : Tullett Prebon
0.17
+0.0080 +5.10%
Volume: 0.00
April 15, 2021 12:44a
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/zigman2/quotes/211347052/realtime
add Add to watchlist BX:TMUBMUSD30Y
BX : Tullett Prebon
2.31
-0.0038 -0.16%
Volume: 0.00
April 15, 2021 12:49a
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/zigman2/quotes/209948968/delayed
US : U.S.: CME
$ 4,124.50
+6.60 +0.16%
Volume: 42,193
April 14, 2021 11:42p
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/zigman2/quotes/201400686/delayed
UK : U.K.: London
302.50 p
+15.60 +5.44%
Volume: 30.25M
April 14, 2021 4:35p
P/E Ratio
N/A
Dividend Yield
2.88%
Market Cap
£38.23 billion
Rev. per Employee
£765,499
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Steve Goldstein is MarketWatch markets editor for Europe. Follow him on Twitter: @MKTWgoldstein.

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