The U.K.’s blue-chip stocks sharply dropped Wednesday, falling by the most in two weeks, as the U.S. said it plans to hit Chinese imports with another $200 billion in tariffs, intensifying a trade fight between the world’s largest economies.
How markets are moving
The FTSE 100 index (FTSE:UK:UKX) fell 1.3% to close at 7,591.96, suffering its steepest decline since June 25. The index on Tuesday finished up by less than 0.1% after a choppy session.
The pound (XTUP:GBPUSD) was at $1.3238, down from $1.3274 late Tuesday in New York. Against the euro, the pound (XTUP:GBPEUR) fell to €1.1293 from €1.1303.
What’s driving the market?
U.K. and the broader European stock market (STOXX:XX:SXXP) slumped after the White House said late Tuesday it’s preparing to assess tariffs of 10% on a further $200 billion in products imported from China. China’s Ministry of Commerce said in a statement that the new levies are “totally unacceptable” and that the behavior is hurting not just China, but the whole world.
The U.S. last week hit Beijing with levies on $34 billion in goods, and Beijing retaliated with tariffs of the same amount.
The newly proposed round of tariffs on items including electronic components, furniture and tuna would take effect in two months, allowing time for the two countries to discuss the matter, and for U.S. businesses to comment on the line-up of affected goods.
Heavily weighted mining shares on the FTSE 100 were hit again on the prospect of worsening trade relations between the U.S. and China, which is the world’s largest buyer of copper. Copper futures dropped nearly 3% on the New York Mercantile Exchange on Wednesday.
What strategists are saying
• “If we see these duties kick in, nearly half of all Chinese exports will be under tariffs. Let me put this in simple language for the markets to try to understand: “This is a T-R-A-D-E W-A-R. Not a spat,” said Michael Every, senior Asia-Pacific strategist at Rabobank, in a note.
• “Traders are now waiting for China’s reaction, other than the words of shock that they have expressed so far. A tit for tat response it almost guaranteed and the markets will stay jittery until there is more clarity on what will come next. However, as with last Friday’s tariff announcement, flows into safe haven assets have not been as strong we might expect,” said Fiona Cincotta, senior market analyst at City Index, in a note.
Investors yanked down shares of metals producers, with Glencore PLC (LON:UK:GLEN) (OTC:GLCNF) down 4.8%, Anglo American PLC (LON:UK:AAL) off by 3.9%, and copper miner Antofagasta PLC (LON:UK:ANTO) lower by 3.1%. Iron ore producer BHP Billiton PLC (NYS:BHP) (ASX:AU:BHP) also fell 3.1%.
Shares of oil producers were also knocked down alongside miners. BP PLC (NYS:BP) shed 3.2% and Royal Dutch Shell PLC (LON:UK:RDSB) (NYS:RDS.B) ended 2% lower.
Shares of Asia-focused lenders HSBC PLC (LON:UK:HSBA) (NYS:HSBC) and Standard Chartered PLC (LON:UK:STAN) closed down 0.9% and 2.2%, respectively.
Burberry Group PLC shares (LON:UK:BRBY) (OTC:BURBY) lost 4.1% after the luxury-goods retailer said dampened demand among tourists in Europe led to slower like-for-like sales in the first quarter.
Indivior PLC shares (LON:UK:INDV) plunged 30% on the mid-cap FTSE 250 index (FTSE:UK:MCX) after the drug maker issued a profit and sales warning for 2018, citing negative market developments in the U.S.
Sky PLC (NYS:SKY) fell 0.5% after 21st Century Fox Inc. (NAS:FOXA) raised its takeover bid for the British broadcaster, valuing it at £24.5 billion ($32.5 billion), heating up a bidding war with Comcast Corp. (NAS:CMCSA) .