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LONDON MARKET CLOSE: Stocks Mixed As Trump Makes Good On Trade Threats

LONDON (Alliance News) - Stocks in London ended mixed on Friday, with the FTSE 100 down, tracking ...

Alliance News 10 May, 2019 | 5:11PM
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LONDON (Alliance News) - Stocks in London ended mixed on Friday, with the FTSE 100 down, tracking US equity markets lower, as President Donald Trump followed through on his threat to raise tariffs on Chinese imports.

The US hiked the tariff on USD250 billion worth of Chinese goods from 10% to 25% after the US and China failed to reach a trade deal by a midnight deadline.

Additionally, Trump noted in a post on Twitter that the process has begun to place tariffs on the remaining USD325 billion worth of Chinese imports.

Trump praised the massive tariff payments to the US Treasury and said there is "absolutely no rush" to reach a trade agreement with China.

"Tariffs will bring in FAR MORE wealth to our Country than even a phenomenal deal of the traditional kind. Also, much easier & quicker to do," Trump tweeted.

Meanwhile, the Chinese government issued a muted response to the US tariff hike, though it vowed to retaliate.

The FTSE 100 index closed down 4.12 points, or 0.1%, at 7,203.29, ending the week down 2.4%. The FTSE 250 ended up 81.22 points, or 0.4%, at 19,366.80, ending the week down 1.7%, and the AIM All-Share closed up 3.31 points, or 0.4%, at 957.33, ending the week down 1.3%

The Cboe UK 100 closed up 0.3% at 12,231.91, the Cboe UK 250 up 0.6% at 17,419.99, the Cboe UK Small Companies ended up 0.1% at 11,727.63.

In Paris the CAC 40 ended up 0.3%, while the DAX 30 in Frankfurt ended 0.7% higher.

Spradex nalyst Connor Campbell said: "While not as sharp as yesterday's initial collapse, the Dow Jones was still in a bad way after the bell. Unlike its European peers - which managed, by some strange alchemy, to spin the last 24 hours as a positive - the Dow called a spade a spade, dropping following the Trump team's decision to press ahead with the promised tariff hike at 12.01am this Friday."

"This, inevitably, had an impact on the European indices. The FTSE 100, which had risen as far as 7,280, saw its gains trimmed, putting it dangerously close to 7,200."

In contrast to equity markets on the continent, stocks in New York were sharply lower at the London equities close, extending losses from the previous session.

The DJIA was down 1.1%, the S&P 500 index down 1.4% and the Nasdaq Composite down 1.7%.

"Whilst we are not seeing investors sell out of US stocks with the same vigor, as earlier in the week, investors are clearly nervous as to how these tariffs will impact on the US economy. The bottom line is that traders believe that the US-Sino trade dispute will eventually end in a deal, but not before both sides feel some economic pain," said City Index analyst Fiona Cincotta.

In the FTSE 100, International Consolidated Airlines Group ended up 1.9% after the British Airways parent turned in a profit, albeit a significantly reduced one year-on-year, for the first quarter of 2019.

For the three months to March 31, IAG posted pretax profit of EUR86 million, down 90% from the previous year's EUR885 million, hampered by the later timing of Easter this year and higher fuel costs.

"It's not every day you'll see a company's profits fall so sharply but the shares still rise. But when your competitors have slipped into a loss, it's perhaps not a surprise," commented George Salmon, equity analyst at Hargreaves Lansdown.

"And it's not just the resilient profits that separate IAG from the pack. While others have bemoaned how Brexit uncertainty has prevented customers from making advance bookings, IAG is seeing no such headwinds," he added.

Traffic figures for the month of April, which included Easter Sunday, saw passenger numbers up 7.3%, indicating a good start to the second quarter.

At the other end of the large cap index, Bunzl ended the worst performer, down 3.0% after the distribution group said long-standing Finance Director Brian May is to retire.

May has been with Bunzl for 25 years, having been finance director since 2006. He will be replaced by Richard Howes, who will take up the title of chief financial officer-designate with effect from September 1. Howes will then assume the full CFO role in January 2020.

Howes is CFO of automotive distributor and retailer Inchcape, whose shares were down 0.6% at midday.

British Land closed down 2.4% after Barclays cut the commercial property company to Underweight from Equal Weight.

In the FTSE 250, Brewin Dolphin closed down 4.7% at 306p after the wealth manager raised GBP60 million through a share placing following a series of acquisitions, it said Friday, including a new one in Ireland.

The company said it placed 19.7 million shares at a price of 305 pence each. The placing price is a 5.0% discount to Brewin's closing price of 321p on Thursday in London.

Brewin has bought the Irish wealth management unit of Investec for around EUR44 million. The firm, which confirmed mid-April it was in talks with Investec, said this builds on its plan to expand Irish operations, creating a "top three" wealth management business in the republic.

Meanwhile, Uber Technologies became the latest 'unicorn' to trot onto the New York Stock Exchange as long-time employees rang the bell on Wall Street to mark the company's first day of public trading.

A unicorn company is a startup with a valuation over USD1 billion.

The IPO marks the highly anticipated start of public trading for a company that in the 10 years since its founding in San Francisco revolutionised the taxi industry and evolved into multiple other businesses.

Uber dominates the smartphone app-based ride-hail market in the US, and also offers food delivery services, freight intermediation for truck drivers, and e-bike and scooter sharing.

Uber priced its shares at USD45 - at the lower end of the USD44 to USD50 price range - valuing the company at about USD82 billion, making it one of the biggest IPOs of all time.

On the US economic front, dollar was lower against the pound after consumer inflation improved less than forecast in April, supporting hopes for the US Federal Reserve keeping interest rates on hold for the foreseeable future.

Data from the Labor Department showed that the consumer price index rose by 0.3% in April after climbing by 0.4% in March. Economists had been expecting another 0.4% increase.

Core inflation inched up 0.1% for third consecutive month compared to economist estimates for a 0.2% up-tick.

Compared to the same month a year ago, consumer prices in April were up by 2.0%, reflecting a modest acceleration from the 1.9% growth in March.

The pound was quoted at USD1.3030 at the London equities close, higher than USD1.3017 at the close Thursday.

In domestic economic news, the UK economy grew at a faster pace in the first three months of the year, in line with economists' expectations, led by a pick up in manufacturing and business investment that took place ahead of the original Brexit deadline towards the end of March.

Gross domestic product grew 0.5% from the final three months of 2018, when it rose 0.2%, preliminary estimates from the Office for National Statistics showed on Friday.

The Bank of England and economists had also predicted the same pace of expansion. In the third quarter, growth was 0.7%.

On a month-on-month basis, GDP decreased 0.1% in March after a 0.2% gain in February. Economists had forecast stagnation for March. In January, GDP rose 0.5%. In the first quarter, GDP grew 1.8% year-on-year, which was the fastest pace since the July to September quarter of 2017, the ONS said.

"Some activity may have been brought forward in the first quarter in other areas such as government consumption and government investment, so the pleasant news in the first quarter might be followed by a bit of a hangover in the second quarter," Capital Economics economist Ruth Gregory said.

"Given the Brexit paralysis, there is a real risk that business investment declines further over the coming quarters."

The euro stood at USD1.1241 at the European equities close, against USD1.1233 late Thursday.

Brent oil was quoted at USD70.35 a barrel at the London equities close, up from USD69.72 at the close Thursday.

"Oil has recovered a small amount of recent losses, and tensions regarding US-China trade have simmered a little, and that has encouraged some short covering, but it is worth noting the US-China situation is far from solved," said CMC Markets analyst David Madden.

Gold was quoted at USD1,287.50 an ounce at the London equities close, higher than USD1,284.20 late Thursday.

The UK corporate calendar on Monday has interim results from speciality chemicals company Victrex and from technical products supplier. There are also trading statements from British Gas parent Centrica and funeral services provider Dignity.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

Copyright 2019 Alliance News Limited. All Rights Reserved.

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Securities Mentioned in Article

Security Name Price Change (%) Morningstar
Brewin Dolphin Holdings PLC 340.40 GBX 0.77 -
Bunzl PLC 2,024.00 GBX -0.25
British Land Co PLC 556.00 GBX 0.40 -
International Consolidated Airlines Group SA 557.40 GBX 2.80 -

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