Markets

UK stocks close lower as Trump threatens China, continental European markets closed

Key Points
  • U.S. President Donald Trump on Thursday threatened new tariffs on China over the coronavirus pandemic.
  • Markets in Germany, France, Italy and other major European economies are closed for Labour Day.
  • European stocks finished out their strongest month since October 2015 on Thursday.

U.K. stocks closed lower on Friday as market sentiment was rattled by a new threat from U.S. President Donald Trump to impose retaliatory tariffs on China over the coronavirus pandemic.

The FTSE 100 provisionally closed down over 2% as markets in Germany, France, Italy and other major European economies were closed for Labor Day. European stocks finished out their strongest month since October 2015 on Thursday.

Trump on Thursday threatened new tariffs on Beijing as his administration crafts retaliatory measures over the origin of the pandemic which has swept through the U.S. and crippled its economy.

Trump also suggested that the long-awaited phase one trade deal signed between the two nations in January was now of secondary importance.

The market decline comes despite U.K. Prime Minister Boris Johnson's pledge to lay out a plan to exit nationwide lockdowns.

In his first news conference since recovering from the coronavirus, Johnson said the U.K. was past the peak of its outbreak, and vowed to set forth a plan next week on how the country might gradually return to normality.

To date, more than 172,000 people have contracted Covid-19 in the U.K., with 26,842 deaths, according to data compiled by Johns Hopkins University.

On the data front, the final U.K. Markit manufacturing PMI (purchasing managers' index) reading on Friday showed that British manufacturers suffered their worst decline in output for three decades in April. The headline activity index slumped to 32.6 from 47.0 in March.

A survey by trade body Make U.K. published late on Thursday suggested that British manufacturing activity could more than halve in the second quarter as the coronavirus pandemic has caused a collapse in demand for 80% of manufacturers.

On Wall Street, equity markets fell as traders weighed renewed geopolitical tensions between the U.S. and China and corporate results.

In corporate news, Reuters reported that British Airways parent IAG is planning to lay off a quarter of its pilots. BA reportedly intends to cut 1,130 of its 4,346 flight captain and co-pilot jobs in a bid to weather the financial impact from the collapse in demand. IAG shares fell around 3%.

RBS on Friday reported that its first-quarter profits halved from the same period last year, with pre-tax profit coming in at £519 million ($651.5 million). The state-backed British lender also set aside £802 million in credit loss provisions due to the coronavirus crisis. RBS shares gained over 2% to top the FTSE 100, as traders cheered the apparent retention of profitability amid the crisis.

At the other end of the U.K. index, cruise operator Carnival's shares plunged more than 8%.