LONDON MARKETS: FTSE 100 Ends Lower On Trade War Worries

By Carla Mozee, MarketWatch , Anneken Tappe

Next PLC shares knocked down after sales outlook

U.K. equities ended the session lower on Wednesday, on the back of worries that Washington may consider increasing proposed tariffs on Chinese imports, which particularly weighed on mining stocks.

Meanwhile, August trade got under way with hefty batch of new earnings reports. Fashion retailer Next PLC dropped to the bottom of London's blue-chip benchmark after its own trading update.

How markets are performing

The FTSE 100 ended the session 1.3% lower at 7,652.91 points. No sector traded higher, and the basic materials group fell by the most. The London gauge had risen 0.6% on Tuesday (http://www.marketwatch.com/story/ftse-100-finds-higher-footing-as-bp-fresnillo-rise-2018-07-31), marking its highest close since June 14. For July, the index bulked up by 1.5%.

The pound last bought $1.3118, little changed versus Tuesday. On Thursday, the Bank of England on Thursday is widely expected to raise interest rates by a quarter-percentage point to 0.75%.

Read:Bank of England rate hike expected, but Brexit dangers remain (http://www.marketwatch.com/story/rate-hike-expectations-lift-british-pound-but-brexit-dangers-remain-2018-07-30)

What's driving markets

Mining shares as a whole suffered the most as global trade concerns weighed once again. Some White House advisers reportedly urged President Donald Trump to sharply increase tariffs planned for $200 billion worth of Chinese goods (http://www.marketwatch.com/story/advisers-urge-trump-to-raise-tariffs-to-25-on-200-billion-of-chinese-goods-2018-07-31) to 25% from the 10% originally proposed.

The risk of higher tariffs sent copper prices sliding by 2.5%, as China is the world's largest consumer of the industrial metal. The concerns in turn helped drive a broad decline in mining stocks in London.

China plans to retaliate (http://www.marketwatch.com/story/china-says-us-tariff-pressure-wont-work-will-retaliate-reuters-2018-08-01) if the U.S. steps up its use of tariffs to put pressure on Beijing in the dispute over trade, Reuters reported Wednesday.

On Tuesday, the FTSE 100 shook off choppy action after a Bloomberg News report (https://www.bloomberg.com/news/articles/2018-07-31/u-s-china-said-to-seek-to-restart-talks-to-defuse-trade-war) that U.S. and Chinese officials are holding private talks on how to restart negotiations aimed at avoiding a full-blown trade war between the world's largest economies.

Later in Wednesday's session, investors will receive a policy statement from the U.S. Federal Reserve, which is expected to signal that more interest-rate hikes are in the pipeline.

Miners hit

Rio Tinto PLC shares (RIO.LN) ended the day 3.4% lower, alongside a broader decline in mining shares, as the iron ore producer released its financial results.

In its update, Rio Tinto said first-half profit before one-off items rose to $4.42 billion, falling short of a $4.6 billion consensus estimate. Rio Tinto is planning to raise its dividend and buy back a further $1 billion in stock (http://www.marketwatch.com/story/rio-tinto-profit-jumps-plans-further-1b-buyback-2018-08-01)as it first-half net profit climbed 33%.

"The threat for Rio at the moment is a global trade war which dents the Chinese economy. Its sprawling iron ore mines on Australia's west coast fuel economic development in the world's second largest economy, and if demand for new cars and tower blocks slows that won't do it any favors," said Laith Khalaf, senior analyst at Hargreaves Lansdown, in a note.

Among other mining stocks, shares of Glencore PLC (GLEN.LN) closed 3.8% lower, Antofagasta PLC (ANTO.LN) gave up 2.3%, while iron ore producer BHP Billiton PLC (BLT.LN) ended the session 0.6% higher.

Stocks in focus

Next PLC (NXT.LN) shares closed 7.1% lower, falling to the bottom of the FTSE 100, as the apparel and home furnishings retailer maintained its sales and profit guidance for fiscal 2019. Second-quarter sales rose, helped by a run of hot weather conditions (http://www.marketwatch.com/story/next-plcs-sales-rise-beats-views-on-summer-boost-2018-08-01).

Lloyds Banking Group PLC (LLOY.LN) closed 1.7% higher, with the lender raising its margin and capital guidance (http://www.marketwatch.com/story/lloyds-profit-rises-books-new-ppi-provision-2018-08-01) following a strong first half. But the bank booked another major provision over payment-protection insurance because of higher-than-expected claims.

Smurfit Kappa Group PLC shares climbed 3.2% as the Irish paper-and-packaging producer logged a 70% jump in first-half pretax profit (http://www.marketwatch.com/story/smurfit-kappa-pretax-profit-jumps-70-2018-08-01) to 416 million euros ($487.1 million), aided by strong underlying revenue growth in Europe and lower finance costs.

(END) Dow Jones Newswires

August 01, 2018 12:54 ET (16:54 GMT)

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