London pre-open: Stocks to drop as US-China relations escalate further
London stocks were set for losses at the open on Tuesday as the US and China edged closer to a trade war.
The FTSE 100 was called to open 25 points lower at 7,606 after US President Trump said he could add another 10% tariff on $200bn worth of Chinese goods if China goes ahead with its retaliation tariffs.
CMC Markets analyst Michael Hewson said: "This upping of the ante saw markets in Asia slide and unlike yesterday haven bond markets rallied as US treasury yields slid back, the Japanese yen gained and gold rallied. As such European markets look set to continue their losing streak and open lower."
Trump said in a statement on Monday that by retaliating to its imposition of a 25% tariff on $50bn worth of Chinese goods, China was "threatening US companies, workers, and farmers who have done nothing wrong".
"This latest action by China clearly indicates its determination to keep the US at a permanent and unfair disadvantage, which is reflected in our massive $376bn trade imbalance in goods. This is unacceptable. Further action must be taken to encourage China to change its unfair practices, open its market to US goods, and accept a more balanced trade relationship with the US.
"Therefore, today, I directed the United States Trade Representative to identify $200bn worth of Chinese goods for additional tariffs at a rate of 10%. After the legal process is complete, these tariffs will go into effect if China refuses to change its practices, and also if it insists on going forward with the new tariffs that it has recently announced. If China increases its tariffs yet again, we will meet that action by pursuing additional tariffs on another $200bn of goods. The trade relationship between the United States and China must be much more equitable."
In UK corporate news, retirement housebuilder McCarthy & Stone's chief executive has been pushed into early retirement of his own after the company issued a profit warning on Tuesday amid increased caution from potential customers.
An anticipated strong spring selling season failed to materialise and the FTSE 250 company said it now forecast 2,100-2,300 sales for the financial year ending 31 August, meaning profits could fall between 17% to 32% to an expected operating profit range of £65-80m.
Debenhams has warned that annual profit will be at least 20% less than market expectations as the department store chain faces weak consumer spending and discounting by competitors.
Pre-tax profit for the current financial year will be in the range of £35-£40m compared with analysts’ average forecast of £50.3m, Debenhams said.
Ashtead Group posted a solid improvement in revenue in its final results, with the figure rising 20% to £3.71bn, while rental revenue was ahead 21% to £3.42bn. The FTSE 100 company made a pre-tax profit of £927m for the year ended 30 April, compared to £793m a year earlier, with the board proposing a final dividend of 27.5p, making for a full-year distribution of 33p.
"Our end markets remain strong and are supported by the continued structural changes in our market as customers rely increasingly on rental while we leverage the benefits of scale," said chief executive Geoff Drabble.