Spreadex | Aug 02, 2019 09:14
The financial markets got a Trump thumping on Friday morning, the European indices left reeling by the President’s shock – but not that shocking – escalation of the trade war with China.
Investors probably should have been prepared for this kind of move from the US considering Trump’s negotiations-tanking Twitter rant earlier in the week. The bellicose leader announced that, if a deal can’t be struck between the two superpowers, a fresh $300 billion of Chinese imports would be slapped with a 10% tariff as of September 1st. This on top of those goods already being penalised.
Just as it had picked itself up after its post-Fed overreaction, the Dow Jones received a swift kick to the gut, dropping around 300 points to sit at its worst price in over 2 months. Of course, this sparked a round of losses in Asia, including a 2%-plus slide from the Nikkei and a 1.4% drop from the Shanghai Composite, and set the stage for a gory European open.
With its mining stocks pummelled – Antofagasta (LON:ANTO) plunged almost 7%, with Glencore (LON:GLEN) tumbling 5.5% – its banks in a state, and BP (LON:BP) and Shell (LON:RDSa) down 2.4% apiece the FTSE shed 110 points after the bell. From the giddy highs of 7700 on Tuesday, the UK index is now under 7470 for the first time since the end of June.
The DAX and CAC were equally as distressed. Coming off the back of Thursday’s contracting manufacturing PMIs the German index dropped 200 points, with its French cousin similarly shaken as it fell 1.8%.
You’d think Trump’s latest trade war cannon blast might take some of the spotlight off of sterling. Well, that wasn’t the case. Even the Lib Dems victory in the Brecon and Radnorshire by-election, a win that reduces Boris Johnson’s Commons majority to one, couldn’t prevent the pound from another round of losses. Against both dollar and euro it fell 0.3%, leaving it at $1.211 and €1.0925 respectively.
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