FTSE 100 falls with European investors nervous over trade tensions
The FTSE 100 has shed one per cent on a bad day for European shares ahead of a major tariff deadline that could exacerbate trade tensions between the US and China.
Germany’s Dax index fell 1.46 per cent, France’s CAC 40 dropped 0.89 per cent, and the pan-European Eurostoxx 600 fell 1.07 per cent.
Read more: UK GDP: Economy stagnates in run up to General Election
The US-China trade war was once again driving markets. New US tariffs on China are set to kick in on 15 December, with the two sides yet to agree on how to avert them.
Tensions between the world’s two largest economies have put markets on a wild ride in 2019 and held back global growth. So far, the US has slapped tariffs on Chinese goods worth $550bn. China has set tariffs on $185bn of US products in retaliation.
“The US are due to slap tariffs on more than $150bn worth of Chinese imports on 15 December, and the will they, won’t they question is circulating around the markets,” said David Madden, an analyst at trading platform CMC Markets.
“The US-China trade situation is likely to be the biggest event of the week. In recent weeks, the language has been largely hopeful but nothing is a done deal.”
US President Donald Trump rattled markets last week by announcing in London that he would be happy for a trade deal to wait until after the late-2020 US presidential elections.
Trump said: “In some ways I think it’s better to wait until after the election with China.” He added that China “want to make a deal now”, but only said he would “see if it’s right”.
Yet the noises from both camps since then have been more positive, although there is still a great deal of uncertainty about how far off a so-called phase one trade deal could be.
The FTSE 100 was also dragged down by a rising pound in the run up to the UK’s 12 December General Election. Currency traders are hopeful that the Conservatives will maintain their lead, bringing some certainty to the economy.
Sterling last stood 0.26 per cent higher against the dollar at $1.318, meaning it was trading at eight-month highs.
The pound’s buoyancy is despite a weak GDP reading which this morning showed the UK economy stagnated in October.
A closely-watched poll from survey firm Yougov is due to come out tonight. Philip Shaw of Investec said: “Markets will be particularly sensitive if the survey shows a result that is materially closer.”