London midday: Stocks sag on global trade concerns

Stocks in London are nursing significant losses after the US President surprised markets with his decision to slap tariffs on Mexico and reports that Beijing might be nearer to retaliating for Washington's decision to blacklist telecoms equipment maker Huawei.

Further dampening sentiment was a weaker-than-expected reading on China's factory sector that analysts said showed that the trade war was already having an impact.

As of 1210 BST, the top-flight index was falling by 0.98% or 72.58 points to 7,145.26, alongside a fall of 0.81% or 156.29 points to 18,954.26 for the second-tier index.

For the month, the top flight index was heading for a fall of nearly 4%, versus a roughly 6% drop for global stocks from their May highs following a 20% rally since the start of 2019, amid an ongoing rush on the part of investors into the relative safety of debt.

To take note of as well, the pound was continuing to cede ground versus the single currency, slipping by 0.33% to 1.1291.

Commenting on Trump's decision to impose a 5% tariff on all goods from Mexico, in response to a "surge" in illegal immigration, analysts criticised the fact that it was a proverbial 'bolt out of the blue' and that it came just as the two countries appeared to be about to ink an agreement on a new trade pact, alongside Canada.

Mexico was America's second largest trading partner and the White House said the tariffs were set to rise gradually until October, when they would reach 25% in the absence of an improvement in immigrant flows on their common border.

Michael Hewson at CMC Markets UK said: "It also makes it much more difficult for countries to take the US at its word when it comes to trade negotiations if its President can so easily lob a hand grenade into the path of an already agreed deal."

In the background, previously announced retaliatory trade tariffs from China were set to kick-in on US goods at midnight and, according to Bloomberg, Beijing had in fact already prepared measures to curb the supply of rare earths should the trade war with Washington escalate further.

And overnight, the 'official' Chinese manufacturing sector Purchasing Managers' Index slumped from a reading of 50.1 for April to a three-month low of 49.4 in May (consensus: 9.9).

That reading prompted Freya Beamish at Pantheon Macroeconomics to tell clients: "As expected, the first shots fired by the U.S. were early enough in the month to affect survey responses, with the new orders component showing the most damage."

On home turf, according to data from Nationwide, UK house prices in Britain dipped at 0.2% month-on-month pace in May, dragging the year-on-year rate of growth down from 0.9% for April to 0.6% in May (consensus: 1.2%).

"[The] data confirm that house prices remain on an essentially flat trend, primarily because Brexit uncertainty has instilled some caution among buyers. The trend likely won’t improve in the next couple of months, given the political deadlock in Westminster," said Samuel Tombs at Pantheon Macroeconomics.

However, consumer confidence in Britain continued to be buoyed by rising wages, according to GfK.

The consultancy's consumer confidence index improved by three points from April to reach -13.

Wizz Air knocked lower

Low cost airline Wizz Air said it was optimistic for the year ahead and would increase net profits after reporting full-year results in line with expectations. Wizz Air on Friday said it expected net profit in the range of €320m - €350m in the current financial year, after posting a 6% rise in net profit to €292m (£257m) in the 12 months to March 31.

Charles Stanley posted better-than-expected full-year results on the back of a better-than-anticipated performance in UK equity markets that buoyed its funds under management and administration, bumping up its dividend payout in the process. "However, given the extent of the equity market rally earlier this year, we anticipate much more modest returns over the remainder of the year," the company said in a statement.

Infrastructure company Balfour Beatty announced on Friday that it has been conditionally selected in joint venture to deliver the $1.7bn (£1.3bn) Interstate 635 LBJ East project on behalf of the Texas Department of Transportation. The FTSE 250 firm said it had a 45% share in the joint venture, with Fluor Corporation holding 55%. Works would include the reconstruction and widening of 11-miles of the interstate highway around the north and east of Dallas in Texas, including the I-30 interchange, as well as the construction of service roads and numerous intersection improvements along the route.

Legal & General said it was selling its general insurance business to Allianz for a minimum £242m. The business comprises principally retail customers who hold household insurance policies. In 2018 gross written premiums were £410m and operating profit was nil, Legal & General said in a statement. It added that further potential payments could be made over a three year period from “ongoing commercial arrangements”.