LONDON MARKET CLOSE: FTSE 100 Plummets On Fresh US Tariff Anxiety

(Alliance News) - The FTSE 100 plunged on Tuesday on the latest US trade war drama, with ...

Alliance News 3 December, 2019 | 4:48PM
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(Alliance News) - The FTSE 100 plunged on Tuesday on the latest US trade war drama, with President Donald Trump threatening tariffs on French luxury goods and saying he has "no deadline" for a deal with China.

Also putting pressure on London's blue-chip index was the pound, which rose following a better-than-expected construction PMI.

The FTSE 100 index closed down 127.18 points, or 1.8%, at 7,158.76. The FTSE 250 ended down 199.28 points, or 1.0%, at 20,500.93, and the AIM All-Share closed down 5.23 points, or 0.6%, at 906.33.

The Cboe UK 100 ended down 1.6% at 12,147.95, the Cboe UK 250 closed down 0.8% at 18,422.73, and the Cboe Small Companies ended down 0.8% at 11,357.82.

In European equities on Tuesday, the CAC 40 in Paris ended down 1.0%, while the DAX 30 in Frankfurt managed to rise 0.2%.

"It's been another choppy day for markets in Europe after an initially positive start. Once again it's been an intervention by President Trump that's upset the apple cart," commented Michael Hewson at CMC Markets.

Speaking in London at the NATO summit, Trump said he has "no deadline" for trade negotiations with China.

"In some ways I like the idea of waiting until after the election for the China deal," he said, referring to US presidential elections in November 2020. "But I'm not gonna say that. I just think that," he added, noting that Beijing wants to "make the deal now."

Trump told reporters China has been "ripping off" the US for "many, many years".

CMC's Hewson commented: "This insouciance about the prospect of putting off any deal has completely upended market expectations that we were potentially millimetres away from a deal, and also flies in the face of the optimism that has seen markets rally strongly over the last few weeks. It also raises the very real prospect that the tariffs that are due to kick in on December 15 will now not get waived."

Trump's comments on a Chinese trade deal came just hours after the US threatened Paris with extra import duties in a row over a tax on digital firms.

French Economy Minister Bruno Le Maire slammed as "unacceptable" the US proposal to put tariffs of up to 100% on French products - including champagne, cheese and handbags - to a trade value of some USD2.4 billion.

The EU "will act and react as one," European Commission trade spokesman Daniel Rosario said, adding that the Commission was in close contact with Paris about the next steps.

The news saw French luxury goods firms end lower, with handbag maker Hermes, Saint Laurent owner Kering and luxury conglomerate LVMH shedding 2.1%, 2.2% and 1.5% respectively.

The US and France have since said they will seek to avoid a trade war, with Trump saying the dispute was "minor" despite the volume of trade the US has with France.

Over in New York, stocks were also suffering at the London equities close, with the Dow Jones down 1.4%, the S&P 500 index down 1.1%, and the Nasdaq Composite 1.1% lower.

London's FTSE 100 has borne the brunt of the day's selling, hindered by the tariff worries as well as a stronger pound and weak commodity prices, said Hewson.

The pound was quoted at USD1.2999 at the London equities close Tuesday, higher compared to USD1.2933 at the close on Monday.

Aiding sterling was a slight improvement in UK construction conditions in November.

At 45.3 in November, the IHS Markit/Chartered Institute of Procurement & Supply purchasing managers' index remained below the no-change mark of 50 but improved slightly from the 44.2 points registered in October. IHS Markit noted the pace of decline eased to its slowest pace since July.

FXStreet consensus had seen a reading of 44.5.

This followed a manufacturing reading on Monday which came in better than expected at 48.9 in November versus 49.6 in October. The reading had been seen at 48.3.

Another currency higher on Tuesday was the yen, as investor flocked to the safe haven.

Against the yen, the dollar was trading at JPY108.50, down compared to JPY109.03 late Monday.

Meanwhile, the euro stood at USD1.1089 at the European equities close Tuesday, firm against USD1.1086 at the same time on Monday.

Another safe haven asset boosted on Tuesday was gold, rising amid the risk-off mood. Gold was quoted at USD1,480.64 an ounce at the London equities close Tuesday against USD1,463.74 at the close on Monday.

This ensured gold miner Fresnillo ended the day at the top of the FTSE 100, up 1.9%, with Polymetal International rising 1.8% to take second place.

Peer Centamin finished as the biggest gainer in the FTSE 250, up 14%, buoyed by news of a takeover approach.

Endeavour Mining said it has unsuccessfully attempted to engage with Centamin over an all-share merger.

In response to the GBP1.47 billion combination proposal, Centamin, which operates the Sukari gold mine in Egypt, said that it is "better positioned" to deliver shareholder returns on a stand alone basis than the combined entity and, as result, its board has unanimously rejected the proposal.

The deal represents a 13% premium to Centamin's closing price on Monday of 112.20 pence, Endeavour said.

London-listed miners exposed to industrial metals, however, were among the session's losers amid the US-China trade tensions. Glencore shed 3.9%, Antofagasta 2.8%, and BHP Group 2.4%.

In other commodities, Brent oil was quoted at USD60.96 a barrel at the London equities close Tuesday, down from USD61.44 late Monday.

This caused shares in oil major BP to fall 2.1% while Royal Dutch Shell 'A' shares closed down 2.4% and 'B' shares 2.5%.

Elsewhere on the LSE, Ferguson closed down 2.7% as the plumbing and heating products provider reported subdued growth in the US for its first quarter.

The firm recorded USD5.21 billion of revenue in the three months to October 31, up 5.3% on the USD4.95 billion seen the year before. Ferguson's group trading profit was up 9.2% year on year to USD451 million in the first quarter, with its underlying trading profit - which excludes a USD18 million accounting boost - rose 4.8% to USD433 million from USD413 million.

Organic growth in the US for the period was 3.1%. A year ago, first quarter organic growth in the US was 9.6%.

Cineworld shares shed 3.3% after the cinema operator warned 2019 trading will be "slightly" below management expectations due to a weak box office performance.

For the 11 months to December 1, the company reported a 9.7% year-on-year drop in total revenue. The UK & Ireland unit posted a 9.7% fall and US business recorded a 10.9% drop.

Group box office revenue fell 13% year-on-year, with UK & Ireland similarly seeing a 13% decline and US a 14% drop.

More positively, Cineworld said integration benefits from the Regal Entertainment acquisition have been better than anticipated.

On London's junior AIM market, boohoo shares ended up 2.8% after the fast fashion retailer said it has been trading "comfortably" in line with market expectations.

boohoo said since its half year-end trading has remained strong across its key brands, while both warehouses have also had a strong operational performance. New brands Karen Millen, Coast, and MissPap, have been successfully integrated onto the company's platform, boohoo added, and initial ranges have been "very well" received.

In Wednesday's UK corporate calendar, there are annual results from broker Numis and interim results from clothing retail Quiz.

In the economic calendar on Wednesday, there are services PMIs from Japan, Ireland, China, Germany, the eurozone, the UK and the US at 0030 GMT, 0101 GMT, 0145 GMT, 0855 GMT, 0900 GMT, 0930 GMT and 1445 GMT respectively.

Outside of this, there is ADP employment change data in the US at 1315 GMT, which comes ahead of Friday's non-farm payrolls.

By Lucy Heming;

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Securities Mentioned in Article

Security Name Price Change (%) Morningstar
Centamin PLC 177.79 GBX -0.78 -
Cineworld Group PLC 64.12 GBX 4.16 -
Ferguson PLC 6,540.00 GBX 0.15
BP PLC 309.85 GBX 0.16
Glencore PLC 171.48 GBX 2.38
Fresnillo PLC 854.20 GBX 3.04 -
Antofagasta PLC 939.80 GBX 1.78 -
Boohoo Group PLC 398.70 GBX -0.35 -
Polymetal International PLC 1,563.50 GBX 0.19 -
Royal Dutch Shell PLC B 1,236.20 GBX 0.00
Royal Dutch Shell PLC Class A 1,302.40 GBX -0.17 -
BHP Group PLC 1,644.60 GBX 1.03
Hermes International SA 745.60 EUR 0.84 -
Kering SA 488.15 EUR 1.49 -
LVMH Moet Hennessy Louis Vuitton SE 396.30 EUR 1.20 -

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