London close: Trade concerns cap poor weak for Footsie
London stocks finished the week sharply lower as US President Trump's threat to ditch the World Trade Organisation and slap more tariffs on China sparked renewed worries about global trade, with gains in Whitbread on deal news failing to act as an offset.
The FTSE 100 finished down by 1.11% or 83.61 points to 7,432.42, even as the pound fell by 0.43% against the dollar to 1.29518, although against the euro it managed to put on 0.22% to trade at 1.1172.
For the week, the Footsie lost 145.07 points.
Spreadex analyst Connor Campbell said: "There had been some hopes the US signing a trade deal with Mexico earlier in the week meant things were perhaps moving in the right direction. However, with reports that Trump is looking to impose additional tariffs on China, his threat to pull the US out of the WTO and the tense, terse situation with both the EU and Canada, the markets are back to fretting about his next move."
Trump claimed on Thursday that the WTO does not treat America fairly. In an interview with Bloomberg, he said: "If they don't shape up, I would withdraw from the WTO." His comments followed reports that Trump had told White House aides he wanted to withdraw from the WTO.
The President also said in the interview that he had rejected an offer from the EU to eliminate tariffs on cars if the US did the same, as he accused the EU's trade policies of being "almost as bad as China".
EU Trade Commissioner Cecilia Malmstrom told the European Parliament's trade committee that the EU was willing to bring down its car tariffs to zero if the US followed suit, but Trump said the offer wasn't good enough and that European "consumer habits are to buy their cars, not to buy our cars".
European Commission President Jean-Claude Juncker said on Friday that if the US decides to impose auto tariffs, the EU will do the same. Speaking to German broadcaster ZDF, Juncker also said that the EU would not let anyone determine its trade policies.
There were also reports that the US President wants to ramp up the trade war with China and hit the country with tariffs on another $200bn worth of Chinese goods as early as next week.
On top of everything else, Friday was the deadline for the US and Canada to reach a trade deal.
On the UK data front, the latest survey from Nationwide revealed that house prices suffered their biggest monthly fall in August since July 2012.
House prices were down 0.5% on the month compared with a 0.7% increase in July, missing expectations for a 0.1% rise.
On the year, prices ticked up 2%, down from a 2.5% jump the previous month and below expectations for a 2.7% increase.
Nationwide's chief economist Robert Gardner said that despite the softening, annual house price growth remains within the fairly narrow range of around 2-3% which has prevailed over the past 12 months, suggesting little change in the balance between demand and supply in the market.
"Looking further ahead, much will depend on how broader economic conditions evolve, especially in the labour market, but also with respect to interest rates. Subdued economic activity and ongoing pressure on household budgets is likely to continue to exert a modest drag on house price growth and market activity this year, though borrowing costs are likely to remain low."
In corporate news, Whitbread bucked the trend, surging nearly 16% as it agreed to sell the Costa coffee chain to Coca-Cola for £3.9bn. The Premier Inn owner, which bought Costa back in 1995 for £19m, said the transaction represents an enterprise valuation multiple of 16.4x Costa's FY18 earnings before interest, taxes, depreciation and amortisation and the valuation is significantly higher than is currently reflected for Costa in Whitbread's market value.
Nicholas Hyett, equity analyst at Hargreaves Lansdown, said: "This is a bitter sweet moment for Whitbread investors.
"On the one hand £3.9bn is an undeniably rich valuation and likely far better than Costa could achieve as an independently listed company, valuing its earnings higher than those of the mighty Starbucks. On the other, Costa has long been the jewel in Whitbread’s crown and some will be sad to see it go at any price, especially given the growth potential in China and elsewhere."
Sage tumbled after announcing that chief executive officer Stephen Kelly was stepping down.
EasyJet flew higher after an initiation at 'buy' by Citi, while British Airways parent IAG was also on the front foot after Davy Research lifted the stock to 'outperform'.
AstraZeneca retreated even as its experimental lupus drug anifrolumab failed to meet its main target in a late-stage clinical study.
Gaming technology company Playtech rallied on news that New York hedge fund Springowl Asset Management has taken a $100m stake in the group.
Elsewhere, Admiral was downgraded to 'hold' at Peel Hunt, while ITV was cut to 'equalweight' at Morgan Stanley. Anglo American was lifted to 'reduce' at Alphavalue, while Wizz was initiated at 'neutral' by Citi.
Market Movers
FTSE 100 (UKX) 7,432.42 -1.11%
FTSE 250 (MCX) 20,689.00 -0.01%
techMARK (TASX) 3,497.04 -1.03%
FTSE 100 - Risers
Whitbread (WTB) 4,629.03p 14.33%
Severn Trent (SVT) 2,001.00p 0.93%
Tesco (TSCO) 246.50p 0.74%
United Utilities Group (UU.) 741.60p 0.38%
Bunzl (BNZL) 2,398.00p 0.38%
RSA Insurance Group (RSA) 631.60p 0.29%
Micro Focus International (MCRO) 1,305.00p 0.27%
Coca-Cola HBC AG (CDI) (CCH) 2,638.00p 0.23%
British Land Company (BLND) 635.60p 0.22%
Hargreaves Lansdown (HL.) 2,200.00p 0.18%
FTSE 100 - Fallers
Sage Group (SGE) 595.40p -7.78%
Burberry Group (BRBY) 2,236.00p -3.08%
Glencore (GLEN) 313.55p -2.90%
Evraz (EVR) 497.50p -2.49%
Melrose Industries (MRO) 222.90p -2.19%
Antofagasta (ANTO) 805.60p -2.19%
Anglo American (AAL) 1,541.60p -2.15%
Royal Dutch Shell 'B' (RDSB) 2,540.50p -2.10%
CRH (CRH) 2,553.00p -1.96%
AstraZeneca (AZN) 5,795.00p -1.95%
FTSE 250 - Risers
Playtech (PTEC) 532.00p 5.30%
Hays (HAS) 203.40p 4.85%
Rathbone Brothers (RAT) 2,634.00p 4.44%
Millennium & Copthorne Hotels (MLC) 531.00p 3.91%
Capita (CPI) 148.50p 3.81%
Energean Oil & Gas (ENOG) 539.00p 3.45%
On The Beach Group (OTB) 526.00p 3.14%
TalkTalk Telecom Group (TALK) 128.10p 2.89%
Halfords Group (HFD) 329.20p 2.87%
Caledonia Investments (CLDN) 2,890.00p 2.85%
FTSE 250 - Fallers
Computacenter (CCC) 1,356.00p -4.51%
Softcat (SCT) 850.00p -4.28%
Serco Group (SRP) 97.65p -3.79%
Wood Group (John) (WG.) 718.60p -3.78%
Sophos Group (SOPH) 524.50p -2.78%
Hilton Food Group (HFG) 914.00p -2.56%
FirstGroup (FGP) 88.65p -2.53%
Aggreko (AGK) 838.60p -2.42%
Vesuvius (VSVS) 620.00p -2.29%
Renewi (RWI) 63.00p -2.17%