LONDON MARKETS: FTSE 100 Turns Lower, But Books Second Weekly Gain In A Row
July 20 2018 - 1:32PM
Dow Jones News
By Carla Mozee, MarketWatch
Pound moves back above $1.31
U.K. blue-chip stocks fell Friday, returning to negative
territory after U.S. President Donald Trump said it was ready to
impose tariffs on some $500 billion in Chinese imports, potentially
ramping up his administration's trade dispute with officials
running the world's second-largest economy.
The London benchmark marked its first loss in four sessions, but
it still posted a win for the week.
How markets performed
The FTSE 100 index fell 0.1% to 7,678.79. On Thursday, the index
rose 0.1%
(http://www.marketwatch.com/story/ftse-100-holds-steady-as-traders-focus-on-retail-sales-data-2018-07-19).
For the week, it booked an 0.2% advance, its second straight weekly
gain.
The pound traded at $1.3105, recovering from an intraday low of
$1.2995, and swerving up from $1.3015 late Thursday in New York.
Sterling on Thursday sank below $1.30 to hit its lowest level
against the greenback since early September.
Against the euro, the pound bought EUR1.1201, up from EUR1.1178
late Thursday.
What's drove the market
The FTSE 100 turned lower, falling alongside a drop in U.S.
stock futures and European stocks, after Trump, in an interview
with CNBC
(https://www.cnbc.com/2018/07/19/trump-says-hes-ready-to-put-tariffs-on-all-505-billion-of-chinese-.html),
said he's "ready" to put tariffs on all Chinese goods imported to
the U.S., which would amount to more than $500 billion. Trump has
previously said he's considering targeting another $200 billion in
Chinese tariffs. China has issued retaliatory levies and Trump's
latest threat could stoke further response from China.
Trump on Friday accused China of manipulating its currency, as a
weaker yuan makes Chinese products cheaper for customers to
purchase. The yuan fell by the most in two years after the People's
Bank of China on Thursday guided the Chinese currency 0.9% lower by
setting the dollar's reference rate at 6.7671 yuan.
(https://twitter.com/realDonaldTrump/status/1020287981020729344)
Read:Dollar tumbles as Trump calls China, EU currency
manipulators
(http://www.marketwatch.com/story/dollar-digests-trump-comments-as-traders-watch-yuan-action-2018-07-20)
The FTSE 100 had trudged higher earlier, aided by weakness in
the pound against the U.S. dollar, but the dollar started to lose
more ground following Trump's latest threat of more tariffs.
A lower value of sterling can help lift the FTSE 100 because
many multinational companies listed on the index generate most of
their sales in other currencies.
Sterling had been knocked down to 10-month lows after
disappointing retail sales data on Thursday dampened hopes that the
Bank of England will raise the benchmark interest rate from 0.5% at
its meeting on Aug 2.
Traders also kept an eye on developments around Brexit, as
European Union ministers met in Brussels to review the British
government's latest White Paper proposals for the future
relationship between the EU and the U.K. The EU's lead Brexit
negotiator, Michel Barnier, said Friday the proposals over a
post-Brexit single market and a customs union may run into legal
barriers.
"There's no justification for us to create additional burdens on
business just because the U.K. wants to leave," Barnier said.
What are analysts saying?
"Whether or not Beijing is intentionally steering its currency
lower as a means of defraying the impact of punitive U.S. tariffs
is unlikely ever to be clarified. However, market events remind
everyone that the yuan is an effective pivot of global foreign
exchange sentiment, with cross-asset tail risk, too," said Ken
Odeluga, market analyst at City Index, in a note.
"Neither Washington nor Beijing appear ready to back off their
stances in the trade conflict. Yet China has almost run out of
levers in that sphere. Chances are rising that financial markets
will become a new front," said Odeluga.
Stocks in focus
Mining stocks were hurt by prospect of worsening trade relations
between the U.S. and China, which is the world's largest copper
consumer. Shares of Glencore PLC (GLEN.LN) fell 1.6%, BHP Billiton
PLC(BLT.LN) lost 1.5%, Anglo American PLC (AAL.LN) gave up 1.4% and
Antofagasta PLC (ANTO.LN) shed 0.1%.
Unilever PLC (ULVR.LN) gained 0.7% to GBP43.62, with Jefferies
and Berenberg each raising their price targets on the consumer
brands company following its earnings report.
Decliners on the benchmark were led by pest-control services
provider Rentokil Initial PLC (RTO.LN) and online food-delivery
services company Just Eat PLC (JE.LN) as shares fell 1.9% and 1.7%,
respectively.
(END) Dow Jones Newswires
July 20, 2018 13:17 ET (17:17 GMT)
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