London close: Footsie finishes at two-year low
London's FTSE 100 sank to its lowest close in more than two years on Thursday, joining a broader market selloff as news of Canada's arrest of a Chinese executive at the behest of the US reignited trade war concerns.
With the heavyweight oil sector also sliding due to plunging oil prices, the FTSE 100 finished down 217.79 points or 3.2% at 6,704.05, hitting its lowest closing level since 4 November 2016, with only three companies' shares in positive territory. The more domestically focused FTSE 250 was 2.8% lower at 17,753.31, also near a two-year low.
Stocks across Europe were under the cosh, with the benchmark Stoxx 600 index, Germany's DAX and France's CAC 40 all tumbling at least 3%. Meanwhile, US futures also pointed to sharp losses on Wall Street, with Dow and S&P 500 futures down 1.8% and Nasdaq futures 2.4% lower.
In currency markets, the pound was up 0.1% against the dollar and the euro at 1.2742 and 1.1238, respectively.
Investors were feeling jittery as it emerged that the chief financial officer of Chinese telecoms company Huawei, Meng Wanzhou, had been arrested in Canada over the weekend and faces extradition to the US over possible violations of sanctions against Iran. China has urged both Canada and the US to "rectify wrongdoing".
"We believe this is a clear signal that the trade war is escalating to a new level," said Deutsche Bank. "We think the probability of US and China reaching a trade deal by March 1 has dropped to 30% from 40%. US business interests in China face higher risk than before.".
"This news pushed policy makers in Beijing into an awkward position. Public opinion in China will likely become more negative in respect to the trade war, and potentially against US companies. The government may find it difficult to tell the public that they have offered significant concessions to the US."
David Cheetham, chief market analyst at XTB, said that while the arrest was making the headlines, it was more likely to be a case of the straw that broke the camel's back, as serious doubts as to the substance of the truce between the US and China emerge.
"Differing accounts from both sides on what the agreement actually entailed were the first warning sign and while the US, and Trump in particular, were quick to laud it as a key breakthrough, upon reflection in the cold light of day it appears that not much has actually changed," he said.
Oil prices flopped lower after a summit of the Opec oil producer's cartel ended the day without any firm decision. Brent crude fell 3.3% lower at $59.50 and West Texas Intermediate was down 3.4% at $51.12 a barrel after Saudi Arabia's energy minister dashed hopes of any steep production cuts at the OPEC meeting in Vienna. Khalid Al-Falih told reporters that no agreement had been reached yet on a production cut and suggested that reducing output by one million barrels a day would be sufficient.
With only an agreement ‘in principle’ to cut output, Chris Beauchamp, chief market analyst at IG said: "While oil is off the lows of the day, it is not likely to hold these lows for long if oil ministers don’t agree a sizeable cut. We wait until tomorrow for further news."
There were heavy losses across the board amid the risk-off mood, with the three stocks in positive territory being precious metals miners Randgold Resources and Fresnillo, with investors no doubt looking for somewhere safe to park their cash. Utilities were relatively solid, led by Severn Trent only just in the green, with National Grid, British American Tobacco, Imperial Brands, United Utilities and Diageo suffering the least heavy losses.
"All these are considered to be defensive stocks, offering goods and services people would buy regardless of economic conditions," said Russ Mould, investment director at AJ Bell. "Diageo is perhaps an exception as an alcohol seller yet investors often turn to large, robust business in times of strife. That may also explain why Unilever and Compass declined much less than the broader market."
Scandal-hit Ted Baker also bucked the trend following recent heavy declines, after it confirmed the appointment of an independent law firm to carry out an investigation into reports of "forced hugging" by founder and chief executive Ray Kelvin, as it posted a dip in revenues in the 16 weeks to 1 December.
In individual company news, packaging group DS Smith slumped despite saying it grew profits 28% in the first half of the year as acquisitions and solid organic growth combined with an increased return on sales margin.
William Hill and Ladbrokes owner GVC Holdings fell on news that Britain's gambling companies have voluntarily agreed to stop advertising during live televised sport.
Just Eat and Royal Mail retreated as it emerged that they will be booted out of the FTSE 100 as of 24 December, replaced by insurer Hiscox and Spirax-Sarco Engineering following the latest quarterly review.
Specialist insurer Beazley slid as it said its early estimate of the cost of claims from the recent California wildfires is $40m (£31m), net of reinsurance. The company said investment markets continue to be volatile and its year to date investment return to 30 November 2018 was 0.5% ($27m).
FTSE 100 - Risers
Randgold Resources Ltd. (RRS) 6,556.00p 2.73%
Fresnillo (FRES) 785.00p 1.08%
Severn Trent (SVT) 1,853.50p 0.05%
United Utilities Group (UU.) 752.60p -0.45%
Centrica (CNA) 136.00p -0.55%
National Grid (NG.) 820.10p -0.65%
Pearson (PSON) 920.00p -0.71%
Imperial Brands (IMB) 2,341.50p -0.86%
easyJet (EZJ) 1,101.50p -1.43%
Relx plc (REL) 1,577.50p -1.52%
FTSE 100 - Fallers
Antofagasta (ANTO) 760.00p -7.07%
Prudential (PRU) 1,410.00p -6.28%
Schroders (SDR) 2,357.00p -6.06%
Melrose Industries (MRO) 156.35p -5.92%
Smith (DS) (SMDS) 307.64p -5.82%
DCC (DCC) 5,670.00p -5.65%
Scottish Mortgage Inv Trust (SMT) 463.00p -5.64%
Mondi (MNDI) 1,633.00p -5.61%
GVC Holdings (GVC) 684.00p -5.61%
Just Eat (JE.) 533.80p -5.31%
FTSE 250 - Risers
BTG (BTG) 853.00p 3.21%
Fisher (James) & Sons (FSJ) 1,662.00p 3.16%
Genus (GNS) 2,386.00p 3.11%
Ted Baker (TED) 1,520.79p 3.00%
Energean Oil & Gas (ENOG) 586.00p 1.21%
Plus500 Ltd (DI) (PLUS) 1,394.75p 1.07%
Telecom Plus (TEP) 1,384.00p 0.73%
F&C Commercial Property Trust Ltd. (FCPT) 133.00p 0.61%
Derwent London (DLN) 2,860.00p 0.42%
Intu Properties (INTU) 111.30p 0.32%
FTSE 250 - Fallers
Premier Oil (PMO) 66.15p -11.45%
Indivior (INDV) 82.56p -11.42%
Spirent Communications (SPT) 118.80p -7.64%
Stagecoach Group (SGC) 163.60p -7.57%
Just Group (JUST) 80.00p -7.57%
Investec (INVP) 433.60p -7.17%
Tullow Oil (TLW) 176.50p -6.96%
Contour Global (GLO) 167.60p -6.84%
IP Group (IPO) 113.80p -6.57%
Rotork (ROR) 236.30p -6.30%