London pre-open: Stocks to tumble as US and China exchange trade salvos
London stocks are expected to open lower on Friday in line with global markets as a trade war breaks out between the world’s two biggest economies, with China promising retaliation to the opening salvo from the US.
The FTSE 100 index is seen falling almost 50 points to extend losses after tumbling to its lowest finish in over 15 months the day before at 6,952.59.
Overnight, the Dow Jones index closed 2.9% lower, the S&P 500 dropped 2.5% and the Nasdaq 2.4% as equities experienced their biggest sell off since 8 February.
Last night President Donald Trump signed off on 25% tariffs on $50bn worth of Chinese imports in a bid to punish the People's Republic for intellectual property infringements.
China's retaliation was immediate as it drew up a list of 128 products as potential retaliation targets for higher duties, aiming its sights at US goods such as pork, apples and steel pipe.
The commerce ministry in Beijing said in a statement on Friday said the higher US tariffs “seriously undermine” the global trading system. “China doesn’t hope to be in a trade war, but is not afraid of engaging in one,” the statement said.
In Asia the Nikkei was down 4.5%, Hang Seng down 3% and the Shanghai Composite down 3.4%.
With a risk averse mood dominating, investors are rushing to sell out of equities, said Jasper Lawler at London Capital Group.
"Despite Trump claiming that the tariffs would make the US 'a much stronger nation' the markets are keenly aware that there will be no winners to a trade war. Worse still, the tit for tat responses that we are now seeing, and can expect to see more of, between the world’s two largest economies, is damaging for their economies and the broader global economy."
In UK company news, Next reported a 5.6% fall in earnings per share and kept its dividend flat after store sales fell in the year to 31 January. Retail full price sales fell 7% but group sales fell just 0.5% to £4.1bn thanks to 11.2% growth in online revenues. The central guidance for the year ahead is for EPS to "modestly move forward".
Smiths Group said underlying revenue had been broadly flat in the first half of the year, reflecting an improving trend, though operating profit had been hit contract timing and higher R&D costs. The full year outlook was reaffirmed, but first-half headline earnings per share fell 11% at 40.4p per share, down 2% on an underlying basis. The interim dividend was upped 2% to 13.80p.
Brick maker Ibstock announced that Joe Hudson will be appointed as CEO of the company from 4 April, on completion of the handover period with retiring Wayne Sheppard.
Indivior said it was likely to appeal a ruling from the US District Court of Delaware, which found that Alvogen does not infringe the asserted claims of three of its US patents protecting its key Suboxone Film treatment for opioid addiction. If Alvogen is successfully launched in the US, Indivior said it believes "it could potentially result in a rapid and material loss of market share for Suboxone Film in the US" within months.