By Muvija M and Shashwat Awasthi
(Reuters) - London's blue-chip index plunged to its lowest in a month on Friday after U.S. President Donald Trump threatened to hit China with more trade tariffs, while a Brexit-induced warning on targets knocked shares in Royal Bank of Scotland.
The FTSE 100 index (FTSE) slumped 1.8% by 0800 GMT, set for its worst day in more than four months, while the FTSE 250 midcap index (FTMC) weakened by 1.1%.
All of the major constituent sectors on both indexes were in negative territory.
Asia-focussed bank stocks, including HSBC (L:HSBA), and oil majors Shell (L:RDSa) and BP (L:BP) led losses on the main index after Trump vowed to impose a 10% tariff on $300 billion worth of Chinese imports from Sept. 1.
Industrials Melrose (L:MRON) and Ashtead (L:AHT), typically more exposed to global trade conditions, slumped 7.6% and 5%, respectively.
RBS (L:RBS) dropped 5%, its biggest one-day fall in nine months, as it warned that deteriorating economic conditions before Brexit were likely to derail next year's profitability and cost targets.
British Airways owner IAG (L:ICAG), however, climbed 4% after reporting strong profit numbers for the first half of its key summer period.
MARKET WHIPLASH
The last major escalation of the U.S.-China trade tensions was behind a sharp drop in the FTSE 100 in May, but the index is still on course for its biggest annual rise since 2016 as Brexit-driven weakness in the pound helps the index's largely internationally-focused companies.
"Anyone trying to determine the next move in stock markets in the last 24 hours would be justified in feeling like they’ve just experienced a bit of whiplash," said CMC Markets analyst Michael Hewson.
"It is not hard to underestimate how much this abrupt escalation has caught markets unawares."
Miners (FTNMX1770) slumped 3% to a two-month low as Chinese iron ore futures dropped after Brazil announced a rebound in exports of the steelmaking material in July. The index, which includes global players Glencore (L:GLEN) and Rio Tinto (L:RIO), is on course for its steepest weekly fall since March.
The long-drawn out trade war has also weighed on the sector as China is the world's top metals consumer.
Among a handful of gainers on the midcap index was pet supplies retailer Pets at Home (L:PETSP) which rose 3% after saying it expects underlying profit to be slightly above current market expectations.
(For a graphic on 'U.S.-China trade war roils global markets', click https://tmsnrt.rs/33amjJl)