(Alliance News) - Share prices in London were sharply lower at midday on Friday after US President Donald Trump's threat to impose retaliatory tariffs on China over the Covid-19 pandemic.
Trump on Thursday threatened China with fresh tariffs as he stepped up his attacks on Beijing over the novel coronavirus crisis, saying he had seen evidence linking a Wuhan lab to the contagion.
The virus is believed to have originated late last year in a market in the Chinese city of Wuhan that sold wild animals for human consumption, but speculation has swirled about a top-secret lab in the ground-zero city.
Trump is increasingly making Beijing's handling of the outbreak a major issue for his November re-election campaign. When asked about reports that he could cancel US debt obligations to China, Trump said he could "do it differently" and act in "probably a little bit more of a forthright manner". "I could do the same thing but even for more money, just putting on tariffs," he said.
The FTSE 100 index was down 130.32 points, or 2.2%, at 5,770.89 at midday. The mid-cap FTSE 250 index was down 291.32 points, or 1.8%, at 16,162.92. The AIM All-Share index was down 1.2% at 800.70.
The Cboe UK 100 index was down 2.2% at 9,767.24. The Cboe 250 was down 1.6% at 13,925.67, and the Cboe UK Small Companies down 0.7% at 9,014.30.
Analysts at IG Group said: "Market sentiment has been dealt a blow as Donald Trump raised the likeliness of yet another significant breakdown in relations between the world's two largest economies. Trump's claim that the Covid-19 virus originated in a Wuhan lab could send shockwaves throughout the world if proven true.
"The last thing markets want right now is another trade war with the world seemingly lurching from crisis to crisis over recent years. With Donald Trump threatening to impose fresh tariffs on China, we are seeing a fresh bout of weakness for the Chinese yuan in response."
Financial markets in China and throughout most of continental Europe are closed Friday for the Labour Day holiday.
In London, Royal Bank of Scotland was up 3.5% after the state-backed lender reported first-quarter earnings that beat company-supplied market consensus.
In the three months to March 31, the bank's operating pretax profit nearly halved to GBP519 million from GBP1.01 billion in the same period a year before. However, this was higher than the GBP415 million consensus estimate.
Profit was hit by a GBP802 million provision - set aside to cover potential loan losses due to the economic downturn that could make it harder for retail and business customers to repay debts. Analysts had been expecting a GBP515 million charge.
Total income was up 3.9% at GBP3.16 billion. The figure beat the consensus estimate of GBP2.84 billion.
"The medium-term question is where this leaves the recovery plan under recently appointed CEO Alison Rose. The state holding in the bank is unlikely to be surrendered any time soon, and the prospects of improving profitability look poor in the current context of rock-bottom interest rates and recession," commented AJ Bell's Russ Mould.
Barratt Developments was up 1.0% after the housebuilder said work will resume at its construction sites on May 11, although its sales centres and show homes will remain closed.
In April, UK peers Persimmon, Taylor Wimpey and Vistry Group made similar announcements of a phased re-opening of their construction sites.
At the other end of the large-cap index, Royal Dutch Shell was the worst performer, with its 'A' and 'B' shares down 8.5% and 7.9% respectively after being hit by a double downgrade. Both share classes already had lost 11% on Thursday.
The oil major was downgraded to Hold from Buy by Berenberg and by HSBC.
On Thursday, Shell announced its first dividend cut since the second world war amid the oil price crash.
Budget airline easyJet was down 6.7%, suffering a negative read-across from peer Ryanair Holdings, which said it will slash up to 3,000 jobs as it embarks on restructuring in response to the destructive effects the Covid-19 pandemic has had on travel.
Ryanair shares were down 5.6%. British Airways-parent International Consolidated Airlines was down 3.7%, and Eastern European budget carrier Wizz Air was down 4.5%.
Travel restrictions mean Ryanair's first-quarter traffic will be more than 99% lower than initially planned. It expects traffic of fewer than 150,000 passengers, a fraction of its initial forecast of 42.4 million passengers. It expects to operate fewer than 1% of its scheduled flight programme in April, May and June.
The pound was quoted at USD1.2565 at midday, down from USD1.2601 at the London equities close on Thursday, after disappointing UK manufacturing PMI data.
The UK manufacturing sector saw "substantial disruption" in April, as output, new orders and employment fell at record rates due to the coronavirus pandemic.
The IHS Markit-Chartered Institute of Procurement & Supply purchasing managers' index fell to 32.6 in April from 47.8 in March, significantly below both the no-change mark of 50 and slightly below the flash reading of 32.9.
The euro stood at USD1.0986, up from USD1.0874 at the European equities close Thursday.
Against the yen, the dollar was trading at JPY106.74, lower than JPY106.94 late Thursday.
Stocks in New York are set to open sharply lower after disappointing earnings from trillion-dollar market-cap club members Apple and Amazon late Thursday.
The DJIA was called down 1.8%, the S&P 500 index down 1.9%, and the tech-heavy Nasdaq Composite down 2.4%.
Amazon.com said late Thursday profit took a hit in the past quarter due to the global pandemic and that its earnings in the current quarter will be wiped out by Covid-related expenses.
The e-commerce giant said revenue surged 26% in the quarter to more than USD75 billion as people hunkered down at home due to the pandemic turned to it for supplies and entertainment. But profit slipped 29% from a year ago to USD2.5 billion. Amazon said it expects anything from a USD1.5 billion operating loss to a USD1.5 billion operating profit in the second quarter to June 30.
The stock was down 5.2% at USD2,346.01 in New York pre-market trade on Friday.
Apple on Thursday reported revenue slipped in the first three months of this year as revenue inched higher despite the pandemic.
The iPhone maker said it made a profit of USD11.2 billion on sales of USD58.3 billion in the quarter, compared to net income of USD11.7 billion on revenue of USD58 billion in the same period a year earlier.
Net sales of iPhones - the big earnings driver for Apple in recent years - dropped 6.7% from a year earlier to USD29 billion in a period during which smartphone sales have been sagging, but services revenue rose 17% to USD13.35 billion.
The stock was down 2.7% at USD286.22 in pre-market trade.
Brent oil was quoted at USD25.92 a barrel at midday London, marginally lower than USD26.50 at the London equities close Thursday.
Gold was trading at USD1,674.36 an ounce, down from USD1,704.48 late Thursday.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
Copyright 2020 Alliance News Limited. All Rights Reserved.
