London close: Investors take profits as US-China talks reach critical point
London stocks finished sharply lower on Tuesday after US President Donald Trump suggested that a trade deal with China may not be reached until after the November 2020 US elections, while a stronger pound and uninspiring data also weighed.
"The worry for traders is that it seems talks are largely non-existent at the moment, with Trump claiming that they may hold off until after the US election a year from now," said IG's Josh Mahony.
"With Trump likely to desire a big boost to growth ahead of those election, it is likely he is bluffing, yet the likely move to impose further tariffs in two-weeks’ time does highlight a breakdown in talks."
The FTSE 100 was down 1.75% at 7,158.76, while the pound was up 0.4% against the US dollar and the euro at 1.3002 and 1.1724, respectively, after a poll by Kantar showed that the Conservatives had increased their lead over the Labour Party during the past week.
The poll put the Tories' support at 44%, up one point from last week, while Labour’s support was steady at 32%.
In the latest news on trade, Trump suggested that there was no deadline for reaching a trade agreement with China.
Speaking to reporters at a meeting with the head of Nato in London, Trump said that a deal with Beijing would only happen if he wanted it to and may not be agreed until after the US elections next year.
"I don't think it's up to if they want to make it, it's if I want to make it. We'll see what happens," he said. "I'm doing very well if I want to make a deal, I don't know that I want to make it, they're going to find out pretty soon."
He added: "In some ways I think it’s better to wait until after the election with China. In some ways I want to wait until after the election for a China deal."
His comments came a day after the US threatened to slap tariffs on $2.4bn worth of French products such as champagne, handbags and cheese in response to the country’s new tax on US technology firms, although on Tuesday he appeared to strike a more conciliatory tone regarding the spat with Paris and the European Union.
US Commerce Secretary, Wilbur Ross, heightened traders' caution further after telling FOX Business on Tuesday afternoon that, if necessary, mid-December would in fact be the ideal moment to impose further tariffs on Chinese exports, as the Christmas shopping season would be spared.
On home turf, data released earlier showed that the construction sector remained in contraction territory in November amid uncertainty about Brexit and the upcoming general election.
The Markit/CIPS construction purchasing managers’ index edged up to 45.3 from 44.2 in October, beating expectations for a reading of 44.5 and signalling the slowest drop in overall construction output for four months. However, it remained below the 50.0 level that separates contraction from expansion.
All three areas of construction recorded a fall in output, with civil engineering the worst-performing category, followed by commercial building.
In equity markets, miners were among the worst performers amid worries about a trade war, with Antofagasta and Glencore both lower and shares of steelmaker Evraz at the bottom of the pile.
Ocado was under the cosh for the second day in a row after announcing a £500m bond offering on Monday.
Plumbing and heating products distributor Ferguson was on the back foot after a trading update, while travel company TUI was dented by a downgrade to ‘neutral’ at Oddo and Aston Martin retreated after Goldman cut the stock to ‘neutral’.
Cineworld lost ground as it warned that full-year trading will be "slightly below" management’s expectations due a "weaker full year box office".
On the upside, Rightmove gained after an upgrade to ‘neutral’ at Goldman Sachs and gold miner Centamin was sitting pretty at the top of the FTSE 250 after its board unanimously rejected a £1.47bn takeover offer from Canada’s Endeavour Mining.
FTSE 100 - Risers
Fresnillo (FRES) 582.60p 1.96%
Polymetal International (POLY) 1,192.00p 1.84%
British Land Company (BLND) 571.60p 0.92%
Halma (HLMA) 2,114.00p 0.86%
Severn Trent (SVT) 2,216.00p 0.73%
Aveva Group (AVV) 4,524.00p 0.44%
SEGRO (SGRO) 866.00p 0.35%
Rightmove (RMV) 621.60p 0.32%
Just Eat (JE.) 765.40p 0.05%
United Utilities Group (UU.) 846.40p 0.02%
FTSE 100 - Fallers
Evraz (EVR) 345.40p -7.42%
InterContinental Hotels Group (IHG) 4,767.00p -3.93%
Carnival (CCL) 3,108.00p -3.84%
Glencore (GLEN) 235.65p -3.74%
Prudential (PRU) 1,300.50p -3.67%
ITV (ITV) 138.75p -3.55%
WPP (WPP) 954.60p -3.13%
Melrose Industries (MRO) 224.00p -3.07%
Smith (DS) (SMDS) 368.30p -2.82%
Antofagasta (ANTO) 845.20p -2.81%
FTSE 250 - Risers
Centamin (DI) (CEY) 129.35p 15.29%
Hochschild Mining (HOC) 166.90p 3.54%
Bakkavor Group (BAKK) 132.00p 3.13%
Spirent Communications (SPT) 215.50p 2.62%
Big Yellow Group (BYG) 1,116.00p 1.73%
TI Fluid Systems (TIFS) 231.50p 1.31%
Contour Global (GLO) 208.00p 1.22%
Telecom Plus (TEP) 1,330.00p 0.91%
Safestore Holdings (SAFE) 741.00p 0.88%
Sirius Real Estate Ltd. (SRE) 81.50p 0.87%
FTSE 250 - Fallers
Go-Ahead Group (GOG) 2,018.00p -8.61%
Wood Group (John) (WG.) 319.60p -6.03%
Synthomer (SYNT) 288.00p -6.01%
William Hill (WMH) 171.95p -5.78%
Investec (INVP) 416.90p -5.68%
Aston Martin Lagonda Global Holdings (AML) 500.60p -5.08%
Ferrexpo (FXPO) 140.00p -5.02%
Kaz Minerals (KAZ) 464.10p -4.55%
Riverstone Energy Limited (RSE) 405.50p -4.36%
Stagecoach Group (SGC) 131.30p -3.88%