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U.K. stocks ended lower on Friday, with fears of a global trade war hurting investor appetite after U.S. President Donald Trump announced import tariffs on at least $50 billion of Chinese products.
Smiths Group topped the list of declines in London after reporting a fall in profit.
What are markets doing?
The FTSE 100 index UKX, -0.44% lost 0.4% to 6,921.94, ending at its lowest close since Dec. 12, 2016, according to FactSet data. For the week, the London benchmark finished down 3.4%, its biggest weekly loss since early February.
The pound GBPUSD, +0.3618% rose to $1.4150 from $1.4096 late Thursday in New York.
Read: These 5 charts show how trade war fears are rattling the markets
What is driving the market?
Trade war fears were back in focus on Friday after tensions between the U.S. and China escalated. Trump’s plans to slap more tariffs on Chinese products have already triggered threat of retaliatory actions from the Asian powerhouse, which rolled out measures to impose tariffs on up to $3 billion of U.S. imports, such as fruit, pork and recycled aluminum.
China’s tariff list didn’t include big-ticket U.S. exports such as soybeans and Boeing airplanes, interpreted as Beijing leaving room to escalate or negotiate.
Also on Thursday night, Trump formally approved temporary exclusions from steel and aluminum tariffs until May 1 for Argentina, Australia, Brazil, Canada, Mexico, European Union nations and South Korea.
Closer to home, traders were also waiting to see whether EU leaders at a summit in Brussels will approve the U.K.’s Brexit transition deal. The agreement was reached on Monday between the EU’s and the U.K.’s Brexit negotiators, Michel Barnier and David Davis, in what is seen as a significant step in avoiding a cliff-edge divorce next year. The EU leaders are widely expected to endorse the agreement.
What are strategists saying?
“Risk appetite has plummeted as fears over protectionism and a trade war between the world’s two largest economies have taken hold,” said Richard Perry, market analyst at Hantec Markets, in a note.
“China’s response was ‘China is not afraid of and will not recoil from a trade war,’ according to the China embassy in Washington. Although China has only announced around $3bn of tariffs on U.S. goods, so far, these are not the words of a nation willing to stand aside and let this happen quietly. It may be that quite how China deals with this situation in the coming days will determine the market’s appetite for risk again,” he added.
Which stocks are in focus?
Shares of Smiths Group PLC SMIN, -4.39% lost 4.4% after the engineering company’ said profit fell in the fiscal first half of the year, hit by higher research costs and lower margin.
On an upbeat note, shares of Next PLC NXT, +7.67% jumped 7.7% after the U.K. high street retailer reported a drop in earnings that wasn’t as bad as feared.
GlaxoSmithKline PLC GSK, +3.28% GSK, +4.83% added 3.3% after the drugmaker said its shingles vaccine, Shingrix, has been approved for adults aged 50 and older in Europe and Japan. The U.K. pharma giant also said it has ended talks to buy Pfizer Inc.’s PFE, -1.00% consumer-healthcare business.
Micro Focus International PLC MCRO, +4.85% rose 4.9%, ending a nine-session losing run. The shares still ended the week 49% lower after the software maker warned on its outlook and said its CEO has resigned on Monday.
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