London close: Stocks pummeled by broadening US-China trade war

Stocks in London finished at their worst levels of the session after the US President announced overnight that starting from 1 September, the US would start to impose a 10.0% tariff on the $300.0bn-worth of Chinese exports not yet subject to trade levies.

Donald Trump had already signalled his displeasure at the start of the week, saying that China had failed to follow-through on pledges to buy more American agricultural products but still caught markets on the hop.

Later on Thursday, Trump reportedly said that the new tariffs would be implemented in phases and that as talks progressed they could be either raised - possibly to well above 25.0% - or lowered.

But some observers believed that China would instead opt to draw out the talks in the hope that their fallout might hurt the US President's chances of re-election, although according to Capital Economics, this time around, the US tariffs might have a bigger impact on China's economy.

For its part, China's foreign ministry said that Beijing would have to take countermeasures if Washington was committed to putting more tariffs on Chinese goods, Reuters reported, adding that the country was not afraid of fighting a trade war.

Against that backdrop, by the end of trading, the FTSE 100 had surrendered 177.81 points or 2.34% to trade at 7,407.06.

And yet futures on the S&P 500 were meanwhile pointing to a drop of only 9.0 points at the start of Friday's session.

"More recently, China agreed to buy agricultural product from the U.S. in large quantities, but did not do so," Trump said on Twitter on Thursday evening.

"Additionally, my friend President Xi said that he would stop the sale of Fentanyl to the United States – this never happened, and many Americans continue to die! Trade talks are continuing, and during the talks the U.S. will start, on September 1st, putting a small additional Tariff of 10% on the remaining 300 Billion Dollars of goods and products coming from China into our Country."

On a more positive note, according to the Department of Labor, US non-farm payrolls increased by 164,000 in July, which was in-line with the 160,000 gain that analysts had penciled-in.

No major UK economic releases were scheduled for Friday.

RBS warns of tough times ahead, IAG profits drop

RBS announced a second special dividend but warned of tough times ahead as the interest rate curve shifts lower and due to Brexit, weighing on its shares.

The majority state-owned lender said it would pay a special dividend of 12.0p, on top of the ordinary interim payout 2.0p.

However, in remarks to Bloomberg TV, the lender's finance chief, Katie Murray, said the less favourable environment would make it harder for the lender to hit its profitability targets and that management was focused on what it could control, namely on continuing to lend and keeping a lid on costs.

"It was RBS's misfortune to release earnings on such a tough day for markets," said IG's Chris Beauchamp.

"Special dividend aside however, there wasn’t much good new in the figures anyway, and the sell-off in the shares seems justified. Tough mortgage competition will continue to chip away at performance, to say nothing of Brexit and a possible no-deal scenario. Dividend or no dividend, the bank has a tough job ahead of it."

Miners were sharply lower for a second day in the wake of the US President's decision overnight to extend US trade tariffs to cover almost all of China's exports.

Financials most exposed to Asia such as StanChart and Prudential also took big hits.

Going the other way, IAG shares staged a bounce following second quarter figures showing an 18% jump in profits and a 7.2% increase in passenger revenues.

A smattering of other defensive issues followed behind on the leaderboard, including Astra Zeneca and Severn Trent.

BT Group's first quarter profit before tax dropped by 8% to £642m as revenue was dragged lower by falls from its consumer, enterprise and global divisions.

Network investment also shot 15% higher to £494m as the UK telecoms giant poured funds into its Broadband Delivery UK and Fibre Cities programmes, as well as launching the UK's first 5G network.

Essentra reported a 1.3% improvement in its revenue on a like-for-like basis in its interim results on Friday, to £507m, although on an actual basis that figure was down 1%.

The FTSE 250 plastics and fibre products provider said its adjusted operating profit up 9.6% at constant currency to £48.3m for the six months ended 30 June, after applying IFRS 16. Adjusted basic earnings per share were 7.5% higher at constant currency, at 12.0p, with the board declaring a half-year dividend of 6.3p per share, unchanged year-on-year.

Market Movers

FTSE 100 (UKX) 7,407.06 -2.34%
FTSE 250 (MCX) 19,253.17 -1.94%
techMARK (TASX) 3,843.49 -1.40%

FTSE 100 - Risers

International Consolidated Airlines Group SA (CDI) (IAG) 448.20p 8.39%
Fresnillo (FRES) 611.00p 0.86%
Flutter Entertainment (FLTR) 6,546.00p 0.74%
AstraZeneca (AZN) 7,240.00p 0.56%
Land Securities Group (LAND) 795.20p 0.53%
Severn Trent (SVT) 2,041.00p 0.44%
TUI AG Reg Shs (DI) (TUI) 816.20p 0.32%
Croda International (CRDA) 4,676.00p 0.21%
National Grid (NG.) 856.60p 0.07%
Sainsbury (J) (SBRY) 195.35p -0.18%

FTSE 100 - Fallers

Royal Bank of Scotland Group (RBS) 202.90p -6.54%
Antofagasta (ANTO) 846.00p -6.25%
Melrose Industries (MRO) 179.30p -6.17%
Prudential (PRU) 1,600.50p -6.13%
Johnson Matthey (JMAT) 3,033.00p -5.51%
Intertek Group (ITRK) 5,642.00p -5.37%
Evraz (EVR) 612.80p -5.02%
Glencore (GLEN) 242.25p -4.79%
BHP Group (BHP) 1,844.00p -4.76%
Mondi (MNDI) 1,630.00p -4.51%

FTSE 250 - Risers

PayPoint (PAY) 993.00p 7.24%
4Imprint Group (FOUR) 2,880.00p 2.48%
Centamin (DI) (CEY) 129.85p 1.73%
CLS Holdings (CLI) 232.50p 1.52%
Sanne Group (SNN) 548.00p 1.48%
Hammerson (HMSO) 214.00p 1.42%
Wizz Air Holdings (WIZZ) 3,587.00p 1.04%
Convatec Group (CTEC) 185.50p 0.82%
Equiniti Group (EQN) 211.20p 0.76%
Inmarsat (ISAT) 578.40p 0.73%

FTSE 250 - Fallers

Hunting (HTG) 460.00p -8.37%
Kaz Minerals (KAZ) 512.60p -6.90%
Aston Martin Lagonda Global Holdings (AML) 468.80p -6.35%
TP ICAP (TCAP) 293.50p -6.23%
Elementis (ELM) 142.02p -5.76%
Man Group (EMG) 162.20p -5.48%
Weir Group (WEIR) 1,376.00p -5.46%
Essentra (ESNT) 398.60p -5.41%
Premier Oil (PMO) 74.78p -5.27%
Travis Perkins (TPK) 1,256.50p -5.17%