London close: Bounce in stocks peters out amid worries of protracted US-China trade tensions
By Alexander Bueso
Date: Tuesday 06 Aug 2019
(Sharecast News) - London stocks finished lower on Tuesday with investors treading cautiously even after China moved to stabilise its currency, the yuan, possibly amid worries that the White House might still ratchet up the pressure on Beijing even futher in response to that weakness in the yuan.
Late in the afternoon, US national economic council director, Larry Kudlow, reportedly said the US administration was not planning any additional response to the People's Bank of China's the day before to allow the yuan to fall to its lowest level since 2008.
But the US Treasury's decision overnight to label Beijing a currency manipulator was worrying some analysts.
According to Andrew Hunter at Capital Economics: "it illustrates how rapidly tensions are escalating and suggests that a resolution to the trade conflict is further away than ever."
Their peers at HSBC were in a similar frame of mind, telling clients that: "escalating tensions were chipping away on what good will there was between the US and China and that the risk of the trade war lasting "well into" 2019 or escalating further was rising.
"It is possible that the working level dialogue and high level meeting in September may not happen," they added.
"It is also possible that these meetings go ahead but do little to change the trajectory of the trade war."
Against that backdrop, the FTSE 100 ended the session 0.72% lower at 7,171.69, having opened in the red and having already suffered heavy losses on Monday on worries about escalating Sino-US trade relations.
Meanwhile, the pound was little changed against the US dollar and the euro, trading at 1.21483 and 1.0846, respectively.
Neil Wilson, chief market analyst at Markets.com, said: "In labelling China a currency manipulator, the US has simply made it clear that there is no goodwill in discussions and no desire for a swift resolution to trade talks. Given the US has already imposed tariffs, the move has little real meaning anyway, but it provides the ammo to press harder on tariffs. As I've argued for some months, there is no chance of a deal until 2020 and the US presidential election.
"But the PBOC has eased concerns a touch by setting the reference rate a little stronger than expected. China doesn't want the yuan to depreciate too quickly and too deep as it risks creating fresh problems like capital outflows."
On home turf, investors were mulling over the latest figures from the British Retail Consortium and KPMG, which showed that retail sales suffered their worst July on record, with total sales growth of 0.3%, down from 1.6% growth last year. This was the lowest level recorded for July since records began in 1995.
Meanwhile, like-for-like sales were up 0.1%, down from 0.5% the previous year.
There was also heightened of a no-confidence vote against the Prime Minister, after Labour leader, Jeremy Corbyn, reportedly signaled his intention of calling a no-confidence vote against the Prime Minister when Parliament returned from its summer recess, in September.
Should Boris Johnson lose, then he would have until 18 September to demonstrate that he can command a majority in the House of Commons and until 19 September to trigger a general election.
In equity markets, Rotork was on the front foot after saying it had made good progress, despite order intake and revenue dropping in the first half.
Meggitt pushed higher as it delivered better-than-expected half-year top-line growth on the back of "robust" growth in both civil original equipment and defence.
On the downside, Rolls-Royce was in the red after it posted a narrowed first-half pre-tax loss and backed its full-year outlook but said group free cash outflow deteriorated to £429m from £72m, due in part to higher Trent 1000 in-service cash costs.
InterContinental Hotels saw its shares drop after it posted a rise in half-year profit and hiked its dividend, but said revenue per available room in the US and China softened.
Shares of Sirius Minerals tumbled after the company said it had decided to suspend the proposed offer by its subsidiary of $500m of senior secures notes due 2027 due to "current market conditions". The bond sale needs to be completed in order for Sirius to secure a credit line from JPMorgan and finish the construction of its Woodsmith mine in North Yorkshire.
Market Movers
FTSE 100 (UKX) 7,171.69 -0.72%
FTSE 250 (MCX) 18,846.20 -0.13%
techMARK (TASX) 3,766.75 0.01%
FTSE 100 - Risers
Royal Bank of Scotland Group (RBS) 200.80p 1.70%
Spirax-Sarco Engineering (SPX) 8,610.00p 1.29%
Ferguson (FERG) 5,898.00p 1.26%
St James's Place (STJ) 931.60p 1.17%
JD Sports Fashion (JD.) 588.80p 1.17%
Just Eat (JE.) 739.40p 1.12%
ITV (ITV) 106.45p 1.04%
Halma (HLMA) 1,896.00p 0.93%
Fresnillo (FRES) 644.80p 0.75%
Micro Focus International (MCRO) 1,660.20p 0.61%
FTSE 100 - Fallers
Rolls-Royce Holdings (RR.) 759.00p -6.87%
NMC Health (NMC) 2,258.00p -6.00%
Centrica (CNA) 69.58p -2.67%
Mondi (MNDI) 1,553.00p -2.51%
Smurfit Kappa Group (SKG) 2,384.00p -2.21%
United Utilities Group (UU.) 760.00p -2.16%
InterContinental Hotels Group (IHG) 5,181.00p -2.04%
Croda International (CRDA) 4,606.00p -1.88%
Smith & Nephew (SN.) 1,817.00p -1.73%
Bunzl (BNZL) 2,047.00p -1.68%
FTSE 250 - Risers
Rotork (ROR) 307.50p 7.56%
Oxford Instruments (OXIG) 1,320.00p 4.11%
Pets at Home Group (PETS) 227.60p 3.55%
Spirent Communications (SPT) 164.80p 3.52%
Hochschild Mining (HOC) 215.80p 3.07%
Plus500 Ltd (DI) (PLUS) 586.20p 3.06%
Hammerson (HMSO) 212.50p 3.00%
Meggitt (MGGT) 588.20p 2.98%
Aston Martin Lagonda Global Holdings (AML) 467.50p 2.79%
IWG (IWG) 371.00p 2.38%
FTSE 250 - Fallers
Sirius Minerals (SXX) 10.40p -28.77%
Provident Financial (PFG) 384.40p -5.18%
BBA Aviation (BBA) 296.80p -4.57%
Vivo Energy (VVO) 113.60p -4.38%
Intu Properties (INTU) 38.81p -4.02%
Riverstone Energy Limited (RSE) 727.00p -3.98%
Restaurant Group (RTN) 140.40p -3.97%
Metro Bank (MTRO) 306.60p -3.30%
Fisher (James) & Sons (FSJ) 1,964.00p -3.25%
Serco Group (SRP) 138.70p -3.01%
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