London pre-open: Stocks to drop as Trump ramps up China trade war

London stocks were set for a downbeat open on Wednesday after the US announced plans to impose tariffs on an extra $200bn of Chinese goods.

The FTSE 100 was called to open 41 points lower at 7,651.

London Capital Group analyst Jasper Lawler said: "Overnight, that unnerving trade war silence from the White House, which allowed stocks across the globe to charge higher in recent sessions, was broken. The US upped the stakes in the trade war with China, sending equity markets tumbling, as risk off prevails.

"The Trump administration announced tariffs on a further $200 billion worth of Chinese imports after the US closing bell overnight. Asian markets fell heavily, with China, unsurprisingly, taking the biggest hit, down over 2% at one point; US and European futures are indicating that investors will sell out shares on the open. In the forex markets the dollar pushed higher versus most of its peers except for the safe haven yen, which experienced a surge in demand."

Lawler added: "This second move by Trump proves that he is committed to this trade war. The markets have, so far, been relatively tame in their reaction. This move by Trump could change that, in which case traders will start to be much more selective over which markets to buy into, choosing on the basis of which markets are potential winners and losers from this trade war. The recent complacency is expected to disappear."

US officials released a list of thousands of Chinese imports that will be hit with the additional tariffs, including hundreds of food products, tobacco, chemicals, coal, steel and aluminium. The list also includes a number of consumer goods, including car tyres, bicycles, furniture and handbags, that are due to be hit by a 10% tax as early as September.

This is on top of the 25% tariffs on $34bn worth of Chinese imports that came into effect last week.

In UK corporate news, housebuilder Barratt said it expected pre-tax profits to come in at a record £835m, up from £765.1m in 2017 after reaching its highest level of completions for a decade.

The company completed 17,579 homes, up from 17,395, in 2017.

“Market conditions remain supportive, with attractive mortgage financing available and strong consumer demand for our homes across the country,” Barratt said.

Burberry reported a flat first quarter of sales due to currency headwinds but 3% growth at constant currency rates. There was no change to full year guidance for underlying sales but some easing of currency effects was expected at current rates.

Software group Micro Focus International issued its unaudited interim results for the six months ended 30 April - the second interims for its 18-month reporting period to 31 October - reporting a pro forma constant currency revenue decline of 8.0%. The FTSE 100 firm did see further improvement in its pro forma adjusted EBITDA margin to 36.0%, up 4.2 percentage points, with expectations for that to increase to about 37% for the full year.

Paddy Power Betfair confirmed that the combination of its US business with FanDuel, initially announced on 23 May, completed on Tuesday. The FTSE 100 bookmaker said the new company would be called FanDuel Group, and would operate a portfolio of brands including FanDuel, TVG, Betfair Casino and DRAFT.