31st May 2019 12:05
LONDON (Alliance News) - Stock prices in London were sharply lower at midday on Friday, as US President Donald Trump's vowed to impose tariffs on Mexico and weak factory data from China dealt a hammer blow to shares. The Trump administration announced a 5% tariff on all goods imported from Mexico to pressure the country into stopping illegal immigrants from entering the US. In a statement, Trump said Mexico's "passive cooperation" with the flow of illegal immigration was an "emergency and extraordinary threat to the national security and economy of the US". The tariff will be imposed on June 10 and be raised to 10% on July 1 "if the crisis persists", Trump added. The tariff will then be gradually increased "if Mexico still has not taken action to dramatically reduce or eliminate the number of illegal aliens crossing into the the US". Mexican President Andres Manuel Lopez Obrador called for dialogue in a letter to Trump written after the announcement, saying that the social issues driving migrants to the US "cannot be fixed with tariffs or coercive measures".Mexico is one of biggest trading partners of the US and many companies - such as carmaker Ford Motor Co and retailer Walmart, use Mexico as a central component of their supply chains. Neil Goddin, manager of Kames Global Equity fund said: "Trump was elected on a promise to curb immigration and that is very popular with his voters. It is no surprise to see immigration becoming a key head line grabber for Trump and it is likely to continue to be so as we head into the election." "It is also clear that Trump and the Republicans favourite weapon is Tariffs; so again expect this to be used freely as a head line grabber as we head into the election. From an implementation stand point it is pretty tough. Some industries send products back and forth to Mexico multiple times; especially the car industry when building cars, so it will be messy and complicated and hopefully a compromise can be reached."The FTSE 100 was down 73.99 points, or 1.0%, at 7,144.17 at midday. The FTSE 250 was down 181.22 points, or 1.0%, at 18,930.29. The AIM All-Share was down 0.5% at 957.11.The Cboe UK 100 index was down 1.1% at 12,109.55. The Cboe UK 250 was down 0.9% at 17,025.53 with the Cboe UK Small Companies 0.1% lower at 11,805.99.In Paris the CAC 40 was down 1.5%, while the DAX 30 in Frankfurt was down 1.9%. "The summer is not fully here yet but the trade temperature is notching up with the US trade rhetoric becoming more threatening by the day. President Trump has directed his ire at Mexico yet again, threatening to bring in tariffs on the country in early June and to gradually increase them to 25% until Mexico stops illegal immigrants entering the US. Britain is also about to face tough Trump love when the US President comes to London next week as he plans to limit intelligence sharing between the countries if the UK goes ahead with plans to use Huawei to build parts of its 5G network," said City Index analyst Fiona Cincotta. Stocks in New York were set to open sharply lower, with the DJIA called down 1.1%, the S&P 500 index down 1.2% and the Nasdaq Composite down 1.5%.In the FTSE 100, Whitbread was up 2.0% after the hospitality firm announced return of up to GBP2 billion to shareholders in the second phase of a GBP2.50 billion capital return programme. The capital return was initially announced after the sale of the its Costa Coffee chain in August to soft drinks company Coca Cola Co, who agreed to pay GBP3.9 billion for the unit.As part of the first phase the company launched an initial share buyback programme in January to repurchase up to GBP500 million by April-end, which was completed in May with Whitbread returning GBP480 million.Whitbread is launching a new tender offer to purchase up to 43.5 million shares, which represents about 25% of Whitbread's issued share capital, in the hope of returning GBP2 billion to shareholders.Bunzl was up 1.5% after Goldman Sachs raised the stock to Buy from Neutral, saying the distribution and outsourcing group's business model can facilitate solid organic growth and strong acquisition execution will deliver double-digit earnings growth.At the other end of the large cap index, miners were lower following weak factory data from China.Antofagasta was down 3.3%, Rio Tinto, down 3.0%, Anglo American, down 2.5% and Glencore was down 2.3%. The manufacturing sector in China turned to contraction in May, the National Bureau of Statistics said, with a manufacturing PMI score of 49.4. That was shy of expectations for a reading of 49.9 and down from 50.1 in April. It also fell below the boom-or-bust line of 50 that separates expansion from contraction. The non-manufacturing PMI came in at 54.3 - unchanged from the previous month and in line with expectations. The composite index had a score of 53.3, down fractionally from 53.4 a month earlier.In the FTSE 250, Rank Group was up 3.0% after the gambling company made a GBP115 million cash offer to buy online gaming firm Stride Gaming.Rank will pay 151 pence in cash per Stride share. This represents a 46% premium to the Stride share price prior to talks opening in early February and 29% higher than the closing price of Stride on Thursday, valuing the firm at GBP115.3 million. Stride was up 24% at 146.55p. At the other end of the midcaps, Wizz Air was down 5.9% after the central & eastern Europe-focused airline warned on a challenging operating environment going forward, due to no signs that air traffic control and airport infrastructure issues will improve "any time soon".Wizz Air posted revenue for the 12 months to March 31 of EUR2.32 billion, 20% higher from EUR1.93 billion the year before, with passenger numbers up 17% to 34.6 million. Pretax profit increased 4.5% year-on-year to EUR300.2 million, with earnings before interest, taxes, depreciation, amortisation, and aircraft rentals was 8.9% higher at EUR718.5 million. The pound was quoted at USD1.2586 at midday, down from USD1.2606 at the London equities close Thursday. "Sterling has managed to recover from its dip yesterday caused by reports that Germany would veto an extension to the October 31 Brexit deadline unless the UK makes some major changes such as a general election or a second referendum. The prospect of the latter, however, seems to be fading after Jeremy Corbyn made comments indicating that he is at odds with parts of the Labour leadership over the idea of a second vote. However, the recovery in sterling/dollar has more to do with the dollar's weakness in the wake of Trump's latest trade tweets than any inherent strength in sterling," said City Index's Cincotta. The euro stood at USD1.1155 at midday, marginally higher than USD1.1134 at the European equities close Thursday. Ahead in the economic events calendar there are Germany inflation readings at 1300 BST and US personal consumption expenditure figures at 1330 BST - the core reading is the Federal Reserve's preferred gauge of inflation.