BP BP Plc

By Steve Goldstein, MarketWatch

British stocks stumbled on Monday as growing concerns about the impact of U.S.-China trade tensions reverberated around the globe.

The U.K. FTSE 100 index slumped 2.05% to 7254.87, with oil producers, banks, miners and insurers all skidding. Only two of the 100 components were higher. BP (BP.LN) shares fell more than 2% as crude-oil futures declined and insurer Prudential (PRU.LN) lost nearly 5%.

Asian stocks were hit hard as the dollar rose above the key 7 level vs. the Chinese yuan, and as protests continued in Hong Kong. "Today's decision by China's central bank to allow the yuan to breach the watershed 7 per dollar mark is a result of the threat by President Trump to impose further U.S. tariffs on imports from China. But it is also consistent with China's policy increasingly to allow the currency to move in line with currency market pressures," said analysts at Oxford Economics.

Markets are still reacting to the news that the U.S. plans to impose 10% tariffs on $300 billion of Chinese goods that, unlike past tariff rounds, would focus on consumer products. China has said it would retaliate.

"There is a feeling that China could inflict a lot more pain on the U.S. in terms of the trade spat, and many traders are worried the economic conflict will rumble on for some time," said David Madden, market analyst at CMC Markets UK.

The yield on the key 10-year Treasury dropped as traders priced in the possibility of more Fed rate cuts. "The fact that the Fed bases its interest rate policy on US-China trade tensions rather than the economic data raises the suspicion that Donald Trump may be adding fuel to the flames on the Chinese side to increase pressure for lower rates," said Ipek Ozkardeskaya, senior market analyst at London Capital Group.

U.S. stock futures pointed to a sizeable decline at the open.

Focus stocks

HSBC Holdings shares (HSBA.LN) (HSBA.LN) dropped 2% after the bank ousted its chief executive (http://www.marketwatch.com/story/hsbc-ceo-john-flint-ousted-after-just-18-months-2019-08-04), John Flint, and announced a rise in second-quarter profit. The bank also announced it is going to cut thousands of jobs (http://www.marketwatch.com/story/hsbc-to-cut-thousands-of-jobs-after-ceo-ouster-2019-08-05).

Fresnillo shares (FRES.LN) rose 3.4% as Bank of America Merrill Lynch reiterated a buy on the silver miner, which had dropped last week after revealing costs of an important mine and reporting first-half financials. "We think there is a degree of overreaction here, perhaps combined with management being understated / overly cautious on prospects to drive value in the business," the broker said.

EasyHotel (EZH.LN) shares jumped 34% after receiving a GBP138.7 million takeover bid from property developer Ivanhoé Cambridge and real-estate fund manager ICAMAP.

(END) Dow Jones Newswires

August 05, 2019 06:00 ET (10:00 GMT)

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