Britain’s main stock market barometer slumped on Thursday to its lowest level since December 2016 amid a broad decline in European equities sparked by increased concerns over Sino-American tensions.
The FTSE 100 index of large UK companies dropped 2.3 per cent during morning dealings in London. It has fallen 10 per cent so far in the fourth quarter and is down almost 12 per cent for the year to date.
European stock bourses sustained a blow on Thursday on fresh jitters over US-China relations, after the arrest in Canada of Huawei’s finance chief, at the request of the US. The pan-continental Stoxx 600 gauge fell 2.3 per cent, bringing its fall for the year to 11.1 per cent.
“Markets are worried by numerous things: global economic growth, rising interest rates and the US-China trade war,” said Russ Mould, investment director at AJ Bell. “The latter is certainly centre stage in today’s sell-off after Canadian authorities arrested the finance chief of Chinese tech firm Huawei.”
Investors are also keeping close tabs on Brexit negotiations with a crucial vote on Theresa May’s withdrawal deal with the EU planned for next Tuesday. Mrs May is facing a revolt from many Conservative MPs and the DUP on the pact causing some political analysts to speculate the prime minister may face an embarrassing defeat that prompts further uncertainty.
The potential implications for corporate Britain are wide-ranging, according to Sharon Bell, European equities strategist at Goldman Sachs in London. Domestic-focused companies are the most vulnerable as they “are sensitive to growth and to a fall in sterling,” she said this week. Financials, retail and real estate stocks and those on the mid-cap FTSE 250 index are also sensitive to Brexit headwinds, she said.
On the other side of the spectrum, external facing companies such as those in healthcare, oil and consumer staples “have little vulnerability,” according to Ms Bell.
On Thursday, the financials sector was the biggest drag on the FTSE 100 index, falling 2.3 per cent with all 17 components down, according to Bloomberg data.
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