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London open: Stocks drop as US-China trade tensions weigh
London stocks fell in early trade on Monday, taking their cue from losses in Asia amid ongoing worries about a trade war between the US and China.
At 0830 BST, the FTSE 100 was down 0.5% to 7,647.82, while the pound was off 0.1% against the euro at 1.1368 and 0.2% lower versus the dollar at 1.3230.
US President Trump has threatened to curb Chinese investments in the US for reasons of “national security”, with a draft series of restrictions on inbound Chinese investments due to be published later in the week.
London Capital Group analyst Jasper Lawler said: “Once again details remain very sketchy, with the scope of such a measure still under discussion. It is now very difficult to get away from the fact that neither side has any intention of backing down in this game of economic chicken.”
Meanwhile, oil prices gushed lower after an initial surge following Opec’s decision last Friday to boost production. Brent crude was 1.8% lower at $74.21 a barrel, while West Texas Intermediate was down 0.2% to $68.42.
“A very confused Opec meeting left investors with a high degree of ambiguity on Friday, resulting in a huge rise in oil prices as the market concluded that supply would increase by less than had been anticipated,” said Rebecca O’Keeffe, head of investment at Interactive Investor. “However, after overshooting on Friday, oil prices have fallen today after OPEC confirmed that they would make up any deficit going forward in the event of unplanned disruptions that might cause output to fall below agreed levels for the group as a whole.”
The EU summit is due to kick off on Thursday, with Brexit set to be in focus again after hard-line Brexiteers ramped up pressure on Prime Minister Theresa May over the weekend for a no deal plan. As well as Brexit, the main issues on the agenda at the summit will be the structure of the EU and immigration.
“Progress on a Brexit deal has been alarmingly slow and with the clock ticking, Brexiteers view this as the only way to ensure a good break from the Brussels. Any signs of a harder Brexit are expected to weigh on demand for the pound, particularly given the lack of high impacting economic data until later in the week, potentially bringing $1.31 back into target,” said Lawler.
In corporate news, serviced office group IWG rallied after announcing that it has been approached by another private equity suitor about a potential takeover, with Terra Firma entering the fray. IWG’s board, which notified of the approach on Saturday after it had been leaked in the press, said it was evaluating a possible cash offer from Terra Firma Investments.
Eastern Mediterranean-focussed exploration and production company Energean Oil and Gas nudged up after saying it has made the decision to drill an exploration well in the Karish North prospect, offshore Israel, with a planned spud date before the end of March 2019, subject to necessary approvals.
Synthomer slipped as it announced a refinancing of its existing bank facilities, consisting of an offering of €300m (£263.5m) in seven-year unsecured senior notes, and a new €300m four-year revolving credit facility.
Melrose Industries ticked lower after being given clearance from the Committee on Foreign Investment in the United States for its takeover of defence contractor GKN.
Outside the FTSE 350, estate agent Countrywide tumbled after cutting its adjusted earnings guidance for the first half again and announcing an equity raising to reduce debt.
Elsewhere, Rolls-Royce was a touch weaker despite an upgrade to ‘hold’ from ‘reduce’ at Kepler Cheuvreux.
