FTSE 100 sinks again after US-China trade war tensions rise over Hong Kong
The FTSE 100 opened lower this morning, with other major European stock markets also down, after the US and China clashed over Hong Kong and fresh doubts emerged about a trade deal between the two.
The FTSE was 0.67 per cent lower shortly after opening, Germany’s Dax index was down 0.64 per cent, and France’s CAC 40 fell 0.69 per cent.
Read more: Trump administration grants Huawei another 90-day reprieve on trade ban
Later the FTSE 100 trimmed losses to stand 0.56 per cent down at 7,222 points.
The Royal Mail dragged on the FTSE 250, tugging it 0.6 per cent lower as it dropped 16 per cent.
The postal service warned of the likely impact of strikes on future profit as well as signalling that a turnaround strategy is behind schedule.
Asian stock markets also finished their day lower. China’s Shanghai composite index shed 0.25 per cent, Japan’s Nikkei 225 dropped 0.48 per cent, and Hong Kong’s Hang Send was 1.52 per cent lower at the close.
Investors’ nerves were shaken by a spike in tensions between Beijing and Washington after the US House of Representatives passed two bills yesterday backing protesters in Hong Kong.
To add to the gloom, US President Donald Trump said of China yesterday: “I don’t think they’re stepping up to the level that I want.” His statement casts doubt on whether a trade deal between the world’s two biggest economies could be reached this month.
Jim Reid of Deutsche Bank pointed out that the “phase one” agreement was first confirmed by Trump and Chinese vice president Liu He six weeks ago, subject to it being officially written.
“Rather than the market simply wondering when it will be signed there has to be a small but growing risk as to whether it gets signed at all,” Reid said.
Read more: Top MP denies British interference in Hong Kong
David Madden, market analyst at trading platform CMC Markets, said: “The US-China trade spat has been rumbling on for over one year, and traders are used to the back and forth.”
“Recently we have seen some European equity markets at multi-year highs, and a number of US indices hit record highs, so Trump’s remarks acted as an excuse to unwind some positions.”
Spreadbetter IG’s chief market analyst, Chris Beauchamp, added: “Trump’s likely signing of the Hong Kong bill raises the prospect that the US and China will find something other than trade to quarrel over.
“If the President was looking for an excuse to renew their trade spat then he has a tailor-made opportunity here to both hit China on trade and present himself as a champion of human rights and democracy. For someone so devoted to his public image, especially now the impeachment hearings are piling on the pressure, the opportunity may be too big to pass up. Stock market indices continue to show signs of ‘rolling over’, with breadth mixed and volatility picking up once again.
“Further trade headlines could easy prompt further losses as we head towards the US Thanksgiving long weekend.”