LONDON MARKETS: FTSE 100 Drops From 4-week High As Trade-war Worries Hurt Mining Shares
June 15 2018 - 8:10AM
Dow Jones News
By Carla Mozee, MarketWatch
Tesco sales mark another quarterly rise; Rolls-Royce shares jump
after update
U.K. stocks fell Friday, pulling back from a nearly four-week
high, with mining stocks knocked by worries about escalating
tensions between the U.S. and China on trade issues.
How markets are performing
The FTSE 100 index dropped 0.7% to 7,708.42. On Thursday, the
index rose 0.8%
(http://www.marketwatch.com/story/ftse-100-slides-as-china-growth-concerns-weigh-on-mining-stocks-2018-06-14)
and ended at its highest since May 23, according to WSJ Market Data
Group.
This week, the London benchmark was on course for a modest rise
of 0.3%, enough to break a string of three weekly declines.
The pound bought $1.3280, slightly higher than $1.3260 late
Thursday in New York. Sterling was looking a roughly 0.8% decline
against the greenback for the week. Against the euro , the pound
fetched EUR1.1464, little changed from EUR1.1462 in the prior
session.
What's driving markets
Equity losses picked up following a Reuters report that the U.S.
government is nearly finished drawing up the list of a second wave
of tariffs on Chinese goods
(http://www.marketwatch.com/story/us-list-of-100-billion-more-in-china-tariffs-almost-finished-reuters-2018-06-15),
on $100 billion of products.
U.S. President Donald Trump late Thursday approved a first round
of levies
(http://www.marketwatch.com/story/trump-oks-around-50-billion-in-tariffs-on-chinese-goods-2018-06-14)
on about $50 billion in Chinese goods, and details of the initial
list are expected to be announced Friday. Beijing responded to
Trump's list approval by saying it will impose levies on $50
billion in U.S. products.
Mining stocks took a hit on concerns that a trade war will lead
to lower demand for industrial and precious metals. China is the
world's largest buyer of copper. This week, mining stocks were
dragged lower on concerns about economic growth in China after
business activity slowed in May
(http://www.marketwatch.com/story/business-activity-slows-in-china-in-may-2018-06-14).
(http://www.marketwatch.com/story/business-activity-slows-in-china-in-may-2018-06-14)
The basic materials sector makes up more than 9% of the FTSE
100's weighting, and mining stocks make up 87% of that sector,
according to FactSet data.
What strategists are saying
"The political wrangling is clearly weighing on sentiment in
capital markets with yields on benchmark U.S. 10-year bonds
drifting lower towards the 2.90% level," said Boris Schlossberg,
managing director of FX strategy, in a note. Yields fall when
investors buy bonds, with government paper considered a haven
asset.
"Despite the seemingly robust growth of the U.S. economy,
investors are clearly concerned that U.S. policy will damage world
trade and slow down growth sooner rather than later and this
disconnect between the generally sanguine current situation and the
negative future sentiment is keeping a cap on the dollar rally,"
said Schlossberg.
Stock movers
Among miners, Anglo American PLC (AAL.LN) fell 2.1% as did
Randgold Resources PLC (RRS.LN) (RRS.LN) . BHP Billiton PLC
(BLT.LN) (BHP.AU) (BHP.AU) declined 1.8% and Fresnillo PLC
(FRES.LN) fell 1.5%.
Rolls-Royce Holdings PLC (RR.LN) rallied 8.2% after the British
aircraft-engine maker said its planned job cuts should help it
exceed a target of GBP1 billion in cash flow
(http://www.marketwatch.com/story/rolls-royce-job-cuts-to-help-hit-1b-in-cash-flow-2018-06-15)
by 2020. Rolls-Royce on Thursday said it would cut 4,600 jobs over
the next 24 months
(http://www.marketwatch.com/story/rolls-royce-to-cut-4600-jobs-amid-engine-problems-2018-06-14).
Tesco PLC shares (TSCO.LN) (TSCO.LN) rose 2% as the U.K.'s
biggest grocer by market share said like-for-like sales rose 1.8%
in the 13 weeks ended May 26, a tenth consecutive quarterly
increase
(http://www.marketwatch.com/story/tesco-sales-rise-after-booker-acquisition-2018-06-15).
Sales were bolstered after Tesco's purchase of food wholesaler
Booker Group PLC.
BT Group PLC shares (BT.A.LN) fell 1.6%. Ofcom, the U.K.'s
communications industry regulator, said in a Thursday report that
there's more work to do by BT "to ensure more independent
decision-making from Openreach," BT's infrastructure network. Ofcom
last year set out plans to make Openreach's network available to
competitors.
Bank stocks were down, losing ground alongside continental
lenders after the ECB said Thursday said the eurozone's interest
rates -- which are at all-time lows -- will remain at their present
levels "at least through the summer of 2019". Bank profits are
helped by higher interest rates, as that increases the spread banks
earn between longer-term assets, such as loans, and shorter-term
liabilities.
Some U.K. banks have operations in Europe through so-called
passporting rights. Shares of Barclays PLC (BCS) (BCS) fell 2.4%
and Lloyds Banking Group PLC (LLOY.LN) (LLOY.LN) lost 1.9%.
(END) Dow Jones Newswires
June 15, 2018 07:55 ET (11:55 GMT)
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