3rd Dec 2019 11:56
(Alliance News) - Risk appetite remained firmly damped on Tuesday as US President Donald Trump's trade war opened on yet another front, with French champagne, cheese and handbags now in his sights.
The FTSE 100 index was down 66.40 points, or 0.9%, at 7,219.54. The FTSE 250 was down 129.77 points, or 0.6%, at 20,570.44, and the AIM All-Share was down 0.1% at 910.26.
The Cboe UK 100 was down 0.9% at 12,236.52, the Cboe UK 250 was down 0.5% at 18,470.33, and the Cboe Small Companies down 0.2% at 11,426.42.
In European equities on Tuesday, the CAC 40 in Paris was down 0.4%, while the DAX 30 in Frankfurt was 0.5% higher.
Stocks in New York are called lower, with the Dow Jones seen down 0.3%, the S&P 500 index likewise set to open 0.3% lower, and the Nasdaq Composite down 0.4%.
"Market sentiment took a turn to a more defensive stance, following a Monday packed with belligerence on the trade front as the US announced its intention to impose new tariffs on South American metal imports, as well as on French products," said Ricardo Evangelista, senior analyst at ActivTrades.
A US proposal to slap duties on French products in response to a tax on giant technology firms is "unacceptable", French Economy Minister Bruno Le Maire said on Tuesday.
Washington on Monday said that France's 3% tax on the local turnover of digital giants discriminated against US firms. US Trade Representative Robert Lighthizer's office proposed duties of up to 100% on French products - including champagne, cheese and handbags - to a trade value of some USD2.4 billion.
France had contacted the European Commission to confirm that if the new duties came into effect, there would be "a European response, a strong response," Le Maire told Radio Classique.
This followed Trump on Monday threatening to impose tariffs on steel and aluminum imports from Brazil and Argentina.
"[The French tariff threat] represents the opening of new fronts in the ongoing global trade dispute, leading to a switch to risk-off in investors' mood, which explains the generalised decline in equities," said Evangelista.
He continued: "In terms of impact on currencies, the US dollar appears to be suffering the most, having lost more than 0.5% against a basket of other major currencies, since last Friday's market close. However, heightened trade tensions aren't the only driver behind the greenback's weakness; figures published on Monday showed a decline in US industrial output, which according to some analysts could be consistent with a contraction."
The euro stood at USD1.1076 at midday Tuesday, soft against USD1.1086 at the same time on Monday. Against the yen, the dollar was trading at JPY108.91, lower compared to JPY109.03 late Monday.
The pound was quoted at USD1.2997 at midday Tuesday, higher compared to USD1.2933 at the close on Monday.
Supporting the pound on Tuesday was a slight improvement in UK construction conditions in November.
At 45.3 in November, the IHS Markit/Chartered Institute of Procurement & Supply purchasing managers' index remained below the no-change mark of 50 but improved slightly from the 44.2 points registered in October. IHS Markit noted the pace of decline eased to its slowest pace since July.
FXStreet consensus had seen a reading of 44.5.
This followed a manufacturing reading on Monday which came in better than expected at 48.9 in November versus 49.6 in October. The reading had been seen at 48.3.
These two PMIs will be followed up by a closely-watched services reading on Wednesday. The services sector in the UK makes up around 80% of the country's GDP.
In the eurozone, industrial prices painted a mixed picture in October, edging higher month-on-month but firmly lower year-on-year.
In the euro area - composed of the 18 countries using the euro currency - industrial prices were 0.1% higher from September, Eurostat numbers showed. Consensus compiled by FXStreet guided for prices to be flat month-on-month in October.
October prices were down 1.9% year-on-year in the euro area, in line with FXStreet consensus.
In commodities on Tuesday, Brent oil was quoted at USD61.00 a barrel midday, down from USD61.44 late Monday.
Gold was quoted at USD1,469.30 an ounce against USD1,463.74 at the close on Monday, higher as the safe haven metal benefited from Tuesday's risk-off mood.
This helped Fresnillo rise 1.4% as the precious metals miner tracked the price of gold higher.
Other mid-cap gold miners were higher, with Hochschild Mining up 2.4% and Centamin rallying 7.7%, also buoyed by news of a takeover approach.
Endeavour on Tuesday said it had unsuccessfully attempted to engage with Centamin over an all-share merger.
In response to the GBP1.47 billion combination proposal, Centamin, which operates the Sukari gold mine in Egypt, said that it is "better positioned" to deliver shareholder returns on a stand alone basis than the combined entity and, as result, its board has unanimously rejected the proposal.
The deal represents a 13% premium to Centamin's closing price on Monday of 112.20 pence, Endeavour said.
Back in the FTSE 100, Ferguson was down 3.5% despite the plumbing and heating products provider reporting first quarter revenue growth.
The firm recorded USD5.21 billion of revenue in the three months to October 31, up 5.3% on the USD4.95 billion seen the year before. Ferguson's group trading profit was up 9.2% year on year to USD451 million in the first quarter, with its underlying trading profit - which excludes a USD18 million accounting boost - rose 4.8% to USD433 million from USD413 million.
Broker Liberum said US growth continues to be "subdued", with organic growth for the period 3.1%. A year ago, first quarter organic growth in the US was 9.6%.
Travel operator TUI was down 3.4% after Oddo BHF cut its rating on the stock to Neutral from Buy.
On London's junior AIM market, boohoo shares rose 2.8% after the fast fashion retailer said it has been trading comfortably" in line with market expectations.
boohoo said since its half year end trading has remained strong across its key brands, while both warehouses have also had a strong operational performance. New brands Karen Millen, Coast, and MissPap, have been successfully integrated onto the company's platform, boohoo added, and initial ranges have been "very well" received.
By Lucy Heming; [email protected]
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