London midday: Stocks turn lower as Trump ramps up trade war rhetoric
London stocks took a turn for the worse by midday on Friday as it emerged that President Trump had ramped up his trade war rhetoric, although there was some good news in the form of improved UK public finances.
The FTSE 100 was down 0.4% at 7,654.50, having risen earlier as resources put in a solid performance, while sterling was up 0.1% against the dollar and the euro at 1.3029 and 1.1190, respectively.
Sentiment took a knock after CNBC released its full interview with US President Trump, having only put out the section on the Federal Reserve on Thursday.
As it turns out, not only did Trump criticise the Federal Reserve's interest rate rises and make it clear he wants a weaker dollar, he also said he was "ready to go to 500" if China doesn't bow to US complaints about its trade policies.
Neil Wilson, chief market analyst at Markets.com, said: "Equities sank sharply in the wake of Trump saying is he ready to slap tariffs on all the goods the US imports from China, which total over $500bn. That is versus the current tariffs on $34bn of imports and therefore points to serious escalation.
"It’s proof, if it were needed, that the president is prepared to go all the way in the trade war to exact concessions from China, which simply cannot match the US firepower. In light of the EU and others saying they are ready to respond to tariffs on cars, the stakes are rising fast. Whether we get to the point where there is a full blown trade war remains debatable, but the odds are shortening by the day.
"Looks like it might be a bad end to the week for equities although we could always get some clarification from Trump before the day is out that calms things down."
As well as complained in the interview about the the weakness in the euro and China's yuan, Trump also said he wasn't thrilled about the potential results of the Fed hiking rates: "Because we go up and every time you go up they want to raise rates again... I am not happy about it. But at the same time I’m letting them do what they feel is best."
Although Trump grabbed the big headlines yet again, positive news about the continued improvement in UK public finances in June came and went pretty much unnoticed. According to the Office for National Statistics, government borrowing fell to its lowest level since 2007 in June, potentially giving Chancellor Philip Hammond more room for manoeuvre in his autumn Budget.
June’s public deficit fell to £5.4bn from £6.2bn public sector net borrowing a year before, excluding stakes in banks, while the previous two months were also revised down.
The deficit fell as borrowing for the first three months of the financial year hit £16.8bn, the Office for National Statistics revealed, down 24.4% from £22.2bn at the end of June last year and the lowest deficit since 2007.
State finances benefited in June from a 3.1% year-on-year fall in government spendingw, while there was a 1.3% fall in debt interest payments and debt interest payments were down 13% year-on-year over the three months to June.
Looking a bit further ahead, this weekend’s will see a G20 finance ministers meeting in Buenos Aires, where US Treasury Secretary Steve Mnuchin will be able to respond to questions on US trade policy. Currently there are no bi-lateral meetings planned with Chinese officials to move things forward on trade.
In company news, insurer Beazley tumbled after reporting lower first-half profits as it paid out more for claims and investment returns declined but top-line growth was strong as rates firmed.
Experian dipped after the Competition & Markets Authority gave the company a week to propose measures to ensure its takeover of ClearScore does not harm consumers or face a full competition inquiry. The CMA said the companies were the leaders in credit checking services and each other’s main competitor.
Premier Oil was lower after analysts at Investec downgraded its rating to 'hold' with a target price of 130p, while Nostrum Oil & Gas was up after Panmure Gordon raised its recommendation to 'buy'.
EasyJet reversed earlier gains to fly lower after saying it is still interested in Italy's Alitalia after Italy's transport minister said the airline will remain the national flag carrier but needed an operational partner, according to a report in the Corriere della Sera.
On the upside, HomeServe was a little higher as the emergency home repairs group said trading has been as expected during its traditionally quieter first quarter.
Unilever rose as it confirmed the successful completion of the first half of its €6bn share buyback programme and said it would start the second on Friday, as it returns value to shareholders following the disposal of its Spreads business. It also benefited from a number of target price upgrades from the likes of Barclays, Jefferies and Berenberg following its results on Thursday.
Sirius Minerals was on the front after it has signed a couple more supply agreements in China for its POLY4 fertilizer that it expects to produce once its North Yorkshire mine is up and running.
Market Movers
FTSE 100 (UKX) 7,654.50 -0.38%
FTSE 250 (MCX) 20,833.44 -0.35%
techMARK (TASX) 3,587.28 -0.22%
FTSE 100 - Risers
Ocado Group (OCDO) 1,082.50p 2.36%
British American Tobacco (BATS) 3,943.00p 2.10%
Smith (DS) (SMDS) 500.80p 1.98%
GVC Holdings (GVC) 1,098.00p 1.67%
Imperial Brands (IMB) 2,934.50p 1.00%
Randgold Resources Ltd. (RRS) 5,586.00p 0.90%
Burberry Group (BRBY) 2,166.00p 0.84%
NMC Health (NMC) 3,792.00p 0.58%
Unilever (ULVR) 4,354.50p 0.55%
Centrica (CNA) 152.85p 0.49%
FTSE 100 - Fallers
Melrose Industries (MRO) 213.60p -2.20%
Admiral Group (ADM) 1,950.50p -1.76%
CRH (CRH) 2,669.00p -1.69%
easyJet (EZJ) 1,615.00p -1.64%
Just Eat (JE.) 863.60p -1.64%
Direct Line Insurance Group (DLG) 334.30p -1.56%
International Consolidated Airlines Group SA (CDI) (IAG) 681.20p -1.42%
Rentokil Initial (RTO) 341.40p -1.30%
Vodafone Group (VOD) 175.94p -1.29%
Associated British Foods (ABF) 2,380.00p -1.29%
FTSE 250 - Risers
Hikma Pharmaceuticals (HIK) 1,626.00p 5.04%
Sports Direct International (SPD) 417.40p 3.06%
Hochschild Mining (HOC) 183.90p 2.74%
Sirius Minerals (SXX) 34.05p 2.07%
AA (AA.) 110.00p 1.99%
Mediclinic International (MDC) 529.20p 1.93%
Inmarsat (ISAT) 559.00p 1.75%
Drax Group (DRX) 356.80p 1.59%
FirstGroup (FGP) 90.00p 1.52%
Cairn Energy (CNE) 227.20p 1.43%
FTSE 250 - Fallers
Just Group (JUST) 120.53p -6.42%
Beazley (BEZ) 525.00p -5.83%
Hays (HAS) 194.00p -5.46%
Moneysupermarket.com Group (MONY) 316.20p -3.72%
Energean Oil & Gas (ENOG) 520.00p -3.53%
Hiscox Limited (DI) (HSX) 1,478.00p -2.57%
Contour Global (GLO) 234.00p -2.50%
Workspace Group (WKP) 1,102.00p -2.22%
Thomas Cook Group (TCG) 95.93p -2.17%
Euromoney Institutional Investor (ERM) 1,384.00p -2.12%