Monday 23 July 2018

Global stocks surge as US-China trade war fears ease

The FTSE 100 soared 165.49 points to 7,199.5.

A picture of US President Donald Trump, as investor fears subside over a US-China trade war (PA)
A picture of US President Donald Trump, as investor fears subside over a US-China trade war (PA)

By Ben Woods, Press Association Chief City Correspondent

More than £42 billion has been added to the value of London’s top-flight stocks as investor jitters over a US-China trade war subsided.

The FTSE 100 soared 165.49 points to 7,199.5, as it joined a wider global rally that sent Germany’s Dax and the Cac 40 in France leaping 2.9% and 2.7% respectively.

Beijing’s pledge to wait 60 days before enforcing a string of tariffs, coupled with White House official Larry Kudlow describing US tariffs as proposals, was enough to convince investors that the spat would not escalate into full-blown stand off.

London-listed equities were also enjoying some support from the weak pound.

Multinational stocks get a boost when sterling falls because their overseas earnings benefit from a more favourable currency translation.

David Madden, analyst at CMC Markets, said: “The US has showed signs that it isn’t as aggressive as traders initially suspected.

“Beijing won’t be implementing its latest list of tariffs for 60 days, so there is still time for the situation to be diffused.

“Market volatility is high, and the choppiness is something that traders are getting used to.

“For the time being, investors are happy to buy into the market, but they are very much aware the sentiment could change quickly.”

On the currency markets, sterling fell back below the 1.40 mark against the US dollar as a lacklustre growth from Britain’s dominant services sector posed concerns for first quarter economic growth.

The pound was down 0.7% to 1.399 US dollars, with activity in Britain’s services sector sinking to it lowest level since the Brexit vote as bad weather and economic uncertainty took their toll.

The closely watched Markit/CIPS services purchasing managers’ index (PMI) showed a reading of 51.7 in March, down from 54.5 in February and missing economists’ expectations of 54.0.

A reading above 50 indicates growth.

Against the euro, the UK currency was down 0.2% to 1.144.

In oil, Brent crude prices pushed 0.8% higher to 68.56 dollars a barrel, as traders were encouraged by signs of cooling tensions between the US and China, the world’s two biggest economies.

Focusing on UK stocks, telecoms giants Vodafone and BT rallied higher as the market reacted to the first stage of bidding for mobile airwaves.

BT-owned EE, Three, O2 and Vodafone have splashed out £1.35 billion for the ability to provide 4G mobile and 5G services.

EE won 40 MHz of 3.4 GHz spectrum at a cost of £302.6 million, Three owner Hutchison picked up 20 MHz of 3.4 GHz spectrum for £151.3 million, O2 parent Telefonica won all 40 MHz of 2.3 GHz spectrum available at £205.9 million, as well as 40 MHz of 3.4 GHz spectrum for £317.7 million while Vodafone won 50 MHz of 3.4 GHz spectrum at £378.2 million.

Shares in Vodafone closed up more than 3%, or 6.4p to 203.7p, while BT was 6.3p higher at 232.3p.

On the second tier, embattled retailer Mothercare staged a late surge after it emerged that Sainsbury’s considered a shock takeover of the struggling high street retailer.

The supermarket giant’s deals team studied a potential move for the babywear chain in recent months but stopped short of tabling an offer, people familiar with the matter told the Press Association.

Mothercare and Sainsbury’s shares rose 1.9p to 19.3p and 6.9p to 244.1p.

The biggest risers on the FTSE 100 were Micro Focus International up 89p at 1,094p, Evraz up 23.3p at 450.4p, Johnson Matthey up 131p at 3,151p, and easyJet up 66.5p at 1,641.5p.

The biggest fallers were Direct Line Insurance Group down 38.5p at 348.1p, Aviva down 14.7p at 487.7p, Randgold Resources down 142p at 5,572p, and Pearson down 9.8p at 733p.

Press Association

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