Thu, 23rd May 2019
Markets across the world fell sharply as the rift between the US and china widened, with a trade and tech war making investors nervous. Shares fell in Europe, North America and Asia as a war of words between Beijing and Washington was combined with poor American economic data, and chaos on the UK political scene.
The Japanese conglomerate Panasonic has cut ties with Chinese telecoms company Huawei, and US secretary of state Mike Pompeo has accused Huawei’s chief executive of lying about the company’s lack of ties to the Chinese communist government.
China has demanded that the Trump administration change course, and has also warned that Britain could see a substantial loss of investment if Huawei were not allowed to be involved in the UK’s 5G network.
The FTSE 100 fell by 103 points, a drop of 1.4 percent, thanks to a combination of these tensions and fears that Theresa May’s departure could make a no-deal Brexit more likely. The pound has fallen by half a cent against the dollar, to $1.26, which is its lowest level since early January.
The Dow Jones Industrial Average fell by 1.1%, with investor sentiment not helped by the news that US business activity was down to its lowest level in the last three years. The German DAX and the French CAC also fell by around 1.7 percent.
While it is possible that this latest slip is temporary, the escalation could have a lasting impact on financial market sentiments and global supply chains, and put the recent economic recovery in jeopardy.