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July 2, 2018, 1:34 p.m. EDT

FTSE 100 finishes sharply lower as U.S.’s clash over trade with Europe escalates

Analyst: ‘The prospect of a downward spiral is very real’

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By Carla Mozee, MarketWatch


AFP/Getty Images
Workers pack copper plates for export at a Chilean mine.

Blue-chip stocks in the U.K. closed firmly in the red Monday, commencing a woeful start to 2018’s second half as the U.S. ramped up trade disputes against China and the European Union.

How markets are moving

The FTSE 100 index /zigman2/quotes/210598409/delayed UK:UKX -0.07%  dropped 1.2% to 7,547.85. The benchmark on Friday rose 0.3% and marked an 8.2% jump for the second quarter, the biggest quarterly rise since 2013.

The pound /zigman2/quotes/210561263/realtime/sampled GBPUSD -0.1515%  fell to $1.3163 from $1.3205 late Friday in New York. The pound leapt above $1.3200 on Friday after U.K. first-quarter economic growth was upwardly revised.

What’s driving markets

U.K. and European equity markets /zigman2/quotes/210599654/delayed XX:SXXP -0.01%  all fell in tandem, mirroring sharp declines in Asian equities /zigman2/quotes/210598127/delayed CN:SHCOMP +0.98%   /zigman2/quotes/210597971/delayed JP:NIK -0.47% .

Chinese economic activity data showed signs of stress stemming from the trade dispute between the U.S. and China, the world’s largest economies. A subindex in China’s official manufacturing purchasing managers index that gauges demand for Chinese exports contracted to 49.8 in June from 51.2 in May. The Shanghai Composite tumbled 2.5% and fell further into a bear market on Monday following the data.

On Sunday, U.S. President Donald Trump in a Fox News interview once again claimed European officials haven’t acted fairly in its trade relationship with the U.S.

“The European Union is possibly as bad as China, just smaller. It’s terrible what they do to us,” said Trump, who also touched on the European auto industry.

“Take a look at the car situation, they send their Mercedes in, we can’t send our cars in. Look what they do to our farmers? They don’t want our farm products,” he said.

The U.S. has already imposed tariffs on steel and aluminum imports from the EU, and the 28-nation trade bloc has issued levies in response.

In addition, a Financial Times report on Sunday said the EU has threatened $300 billion in fresh tariffs against U.S. products if Trump follows through on his threatened levies targeting the trade bloc’s auto makers.

This marks a key week for potential trade developments as the Trump administration is expected on Friday to formally impose tariffs on a round of Chinese goods, and Beijing is expected to retaliate.

Mining stocks on the FTSE 100 are being hit hard on concerns about reduced demand for metals from China, the world’s largest buyer of copper.

Read: Trade-war fears? These lower-risk stocks are weathering the market storms

What strategists are saying

“After spending weeks not fully pricing in the downside risks, as investors hoped that there would be a last-minute reprieve rather than a global trade war, investors are waking up to the potential reality of a trade war and what that means for the wider markets,” said Rebecca O’Keeffe, head of investment at Interactive Investor, in a note.

“Falling Chinese exports will subdue the commodity markets, individual tariffs will markedly affect sectors and their wider supply chain, and the prospect of a downward spiral is very real.”

Click to Play

Explained: The Developing U.S.-China Trade war

Barron's breaks down which industries could get hurt the most, and why.

Stock movers

Among mining shares, Anglo American PLC /zigman2/quotes/201381512/delayed UK:AAL -0.50% stumbled 3%, Antofagasta PLC /zigman2/quotes/200173667/delayed UK:ANTO +0.78% dropped 3.3%, and BHP Billiton PLC    /zigman2/quotes/201400686/delayed UK:GLEN -0.65% gave up 3.1%.

Micro Focus International PLC shares /zigman2/quotes/207956281/delayed UK:MCRO +0.19%  climbed by 1.5% after the U.K. software maker said it would sell its SUSE business segment to a fund led by Swedish private-equity company EQT for $2.5 billion.

/zigman2/quotes/210598409/delayed
UK : FTSE UK
7,332.04
-5.01 -0.07%
Volume: 110,097
Dec. 9, 2021 10:53a
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/zigman2/quotes/210561263/realtime/sampled
US : Tullett Prebon
1.3185
-0.0020 -0.1515%
Volume: 0.0000
Dec. 9, 2021 6:08a
loading...
/zigman2/quotes/210599654/delayed
XX : STOXX
477.31
-0.05 -0.01%
Volume: 0.00
Dec. 9, 2021 11:49a
loading...
/zigman2/quotes/210598127/delayed
CN : China: Shanghai
3,673.04
+35.47 +0.98%
Volume: 43.19B
Dec. 9, 2021 3:01p
loading...
/zigman2/quotes/210597971/delayed
JP : Nikkei
28,725.47
-135.15 -0.47%
Volume: 0.00
Dec. 9, 2021 3:15p
loading...
/zigman2/quotes/201381512/delayed
UK : U.K.: London
2,976.00 p
-15.00 -0.50%
Volume: 471,294
Dec. 9, 2021 10:53a
P/E Ratio
7.51
Dividend Yield
5.90%
Market Cap
£36.59 billion
Rev. per Employee
£253,662
loading...
/zigman2/quotes/200173667/delayed
UK : U.K.: London
1,425.50 p
+11.00 +0.78%
Volume: 79,550
Dec. 9, 2021 10:53a
P/E Ratio
18.55
Dividend Yield
3.82%
Market Cap
£13.98 billion
Rev. per Employee
£172,054
loading...
/zigman2/quotes/201400686/delayed
UK : U.K.: London
367.90 p
-2.40 -0.65%
Volume: 4.28M
Dec. 9, 2021 10:52a
P/E Ratio
33.66
Dividend Yield
2.46%
Market Cap
£48.31 billion
Rev. per Employee
£765,499
loading...
/zigman2/quotes/207956281/delayed
UK : U.K.: London
363.60 p
+0.70 +0.19%
Volume: 124,687
Dec. 9, 2021 10:48a
P/E Ratio
N/A
Dividend Yield
4.87%
Market Cap
£1.22 billion
Rev. per Employee
£197,461
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Carla Mozée is a reporter for MarketWatch, based in London. Follow her on Twitter @MWMozee.

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