London close: Stocks slump amid growing trade concerns

London stocks fell on Wednesday as escalating trade tensions and a warning from the European Central Bank knocked investor sentiment.

The FTSE 100 closed down 1.2% at 7,185.30, while the pound was off 0.2% against the dollar at 1.2628 and flat versus the euro at 1.1338.

Worries about the trade spat between the US and China intensified after a Chinese official warned that products made from China's rare earth minerals should not be used against the country's development. The comment, reported by CCTV, was taken as a veiled threat aimed at the US, whose technology companies are dependent on the materials.

The mood in financial markets soured further after the European Central Bank said in its latest Financial Stability Review that uncertainty about global economic growth prospects has contributed to bouts of high volatility in financial markets. It also warned that weaker-than-expected growth and a possible escalation of trade tensions could trigger further falls in asset prices.

Spreadex analyst Connor Campbell said: "The potential for China to use its stranglehold on the supply of rare earth minerals to a variety of US sectors to gain the upper hand against Trump’s government sparked the day’s losses, which were then cemented as ECB vice-president Luis de Guindos warned the trade war was still the biggest threat to the global economy."

In equity markets, NMC Health was the worst performer on the FTSE 100 a day after it rallied on the back of upgraded guidance. On Tuesday, the company lifted its underlying revenue and earnings guidance for this year to reflect the impact of a healthcare joint venture with Saudi Arabia’s state-run pension fund and consolidation of its earlier acquisition of Boston IVF.

The shares were also hit by a downgrade at Citi.

Elsewhere, Tesco lost ground as the latest data from Kantar showed that its market share fell to 27.3% from 27.7% in the 12 weeks to 19 May. Sainsbury’s and Asda’s market share also declined.

Industrial and engineering software provider Aveva was in the red even as it said full-year pre-tax profits rose 21.7% to £46.7m, driven by increasing demand for industrial software and good sales execution, including an increase in multi-year commitments from key customers.

Doorstep lender Provident Financial was weaker after the Competition and Markets Authority said it was considering whether Non-Standard Finance's proposed £1.3bn hostile takeover would result in a substantial lessening of competition. The watchdog also confirmed that NSF has offered to demerge its home credit business as part of the deal.

On the upside, Southend airport owner Stobart Group surged as it said it swung to an annual loss £58.2m from a profit of £100m the year before - partly due to legal costs - but posted a rise in revenue thanks to an improvement in its two core operating businesses and sounded an upbeat note on the outlook.

Galliford Try rallied a day after saying it had rejected an offer from Bovis Homes for its housebuilding business.

In broker note action, Diploma was initiated at ‘overweight’ by JPMorgan Cazenove, while Electrocomponents was started at ‘neutral’.

Serco was lifted to ‘outperform’ at RBC Capital Markets and Ultra Electronics was initiated at ‘hold’ by Jefferies.

Market Movers

FTSE 100 (UKX) 7,185.30 -1.15%
FTSE 250 (MCX) 18,946.11 -1.35%
techMARK (TASX) 3,475.59 -1.15%

FTSE 100 - Risers

Vodafone Group (VOD) 129.30p 1.71%
Severn Trent (SVT) 1,965.50p 0.64%
Fresnillo (FRES) 742.00p 0.54%
British Land Company (BLND) 532.60p 0.49%
National Grid (NG.) 815.80p 0.46%
Standard Life Aberdeen (SLA) 264.70p 0.42%
SSE (SSE) 1,044.50p 0.34%
Centrica (CNA) 93.90p 0.26%
Johnson Matthey (JMAT) 3,184.00p 0.22%
United Utilities Group (UU.) 797.00p 0.18%

FTSE 100 - Fallers

NMC Health (NMC) 2,435.00p -7.06%
Tesco (TSCO) 225.80p -5.21%
Hikma Pharmaceuticals (HIK) 1,650.00p -4.84%
Flutter Entertainment (FLTR) 5,614.00p -4.43%
Micro Focus International (MCRO) 1,893.00p -4.25%
Burberry Group (BRBY) 1,734.00p -3.61%
Spirax-Sarco Engineering (SPX) 8,375.00p -3.18%
Marks & Spencer Group (MKS) 232.00p -3.17%
Ocado Group (OCDO) 1,167.50p -3.11%
Ashtead Group (AHT) 1,916.00p -3.09%

FTSE 250 - Risers

Galliford Try (GFRD) 593.50p 6.36%
Stobart Group Ltd. (STOB) 124.40p 5.96%
Mitchells & Butlers (MAB) 277.00p 2.97%
Amigo Holdings (AMGO) 239.50p 2.35%
F&C Commercial Property Trust Ltd. (FCPT) 121.40p 1.68%
Pennon Group (PNN) 734.20p 1.46%
TI Fluid Systems (TIFS) 182.60p 1.44%
Playtech (PTEC) 406.40p 1.37%
Sanne Group (SNN) 679.00p 1.34%
Capita (CPI) 109.45p 1.30%

FTSE 250 - Fallers

Just Group (JUST) 54.00p -8.16%
Indivior (INDV) 44.96p -5.84%
Funding Circle Holdings (FCH) 238.50p -5.54%
Avast (AVST) 303.20p -5.07%
Provident Financial (PFG) 449.70p -4.85%
Equiniti Group (EQN) 225.60p -4.49%
Cairn Energy (CNE) 162.40p -4.30%
Bakkavor Group (BAKK) 125.00p -4.29%
Hastings Group Holdings (HSTG) 180.00p -4.26%
Man Group (EMG) 145.74p -4.13%