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(Sharecast News) - London markets suffered steep losses on Friday after China announced it would impose retaliatory tariffs of 34% on US imports, intensifying the ongoing trade conflict with Washington and rattling global investor sentiment.
The FTSE 100 index plunged 4.95% to close at 8,054.98 points, while the FTSE 250 slid 4.4% to 18,365.35 points.
In currency markets, sterling was last down 1.3% on the dollar to trade at $1.2930, while it slipped 0.73% against the euro, changing hands at €1.1766.
"Day two of the Trump Trade War has seen stocks fall further and countries begin to respond in earnest to Wednesday's tariff bonanza," said IG chief market analyst Chris Beauchamp.
"Dow futures slipped below 40,000 and neared 39,000 on news that China would respond with fresh tariffs of its own.
"The chaos engulfing the global economy makes a recession much more likely, which is why we've seen increased chances of Fed rate cuts at the May and June meetings."
Beauchamp noted that Friday's trading had an "air of panic" about it, which could fuel a short-term bounce, but until the Trump administration changes its tune on tariffs or gets its tax cut plans through, he reckoned such rallies were unlikely to go on too long.
"With the VIX at elevated levels, investors can continue to expect wild swings for the time being."
Trade tensions abound as data provides little relief
Geopolitical and economic tensions escalated on Friday as the International Monetary Fund warned that sweeping new US tariffs pose a significant threat to the global economy.
The IMF said it was still assessing the broader macroeconomic impact of measures announced by US president Donald Trump earlier this week, but noted that the new trade regime risks worsening an already fragile outlook.
The US is set to implement a 10% blanket tariff on all imports, in addition to existing levies on vehicles, steel and other targeted goods.
Countries with large trade surpluses or considered adversarial by Washington, including the European Union and China, were facing even higher duties, with China receiving a 34% rate.
The IMF urged all parties to avoid further escalation and resolve tensions through dialogue, warning of increased uncertainty at a time of sluggish global growth.
China responded in kind on Friday, announcing its own 34% tariff on all US imports, effective 10 April.
Beijing described the US move as unilateral and in violation of international norms.
In addition to the tariffs, China imposed export bans on select rare earth materials and added two US drone manufacturers to its "unreliable entities" list, effectively restricting their access to Chinese components.
On home shores, domestic economic data offered little relief.
Retail sales rose modestly in March, but failed to keep pace with inflation, indicating a decline in real terms.
According to BDO, like-for-like discretionary spending rose just 1.8% year-on-year, with in-store performance especially weak.
Homewares and lifestyle goods saw outright declines, while online sales showed stronger growth at 6.1%.
BDO attributed the muted consumer activity to rising living costs, including higher utility bills and council taxes.
"It's no surprise that consumers might be reluctant to spend in discretionary categories when there is so much uncertainty around, including reported potential job cuts from employers struggling to bear the cost of National Insurance changes, personal household bills increasing and now the impact of trade tariffs on the economy," said BDO's head of retail and wholesale Sophie Michael.
"As reduced consumer spending squeezes their revenues, retailers are also facing higher cost bases, with changes to National Insurance, increases to the National Living Wage and higher business rates coming this month."
The UK construction sector also contracted for a third straight month, as measured by the S&P Global purchasing managers' index (PMI), which came in at 46.4.
While slightly above February's reading, the index remained firmly below the 50-point threshold indicating growth.
Civil engineering saw the steepest decline, and job cuts in the sector were the most severe in over four years, reflecting weak demand and cost pressures.
"March data highlighted a challenging month for UK construction companies, as sharply reduced order volumes continued to weigh on overall workloads," said Tim Moore, economics director at S&P Global Market Intelligence.
"Companies remained cautious about their year ahead growth prospects, as fewer sales conversions and a third successive monthly reduction in total new work hit confidence levels.
"Overall business optimism slipped to its lowest since October 2023."
On the continent, factory orders in Germany stagnated in February, showing no growth from the previous month and falling well short of expectations for a recovery.
While large transport and machinery orders rose, sharp declines in other manufacturing sectors, including pharmaceuticals and electrical equipment, offset the gains.
On a yearly basis, total orders were 0.2% lower.
Banks, utilities in the red while some consumer stocks manage gains
On London's equity markets, major UK banks recorded some of the steepest declines on Friday.
NatWest Group dropped 8.2%, Barclays fell 7.69%, and Lloyds Banking Group shed 6.74%.
HSBC Holdings and Standard Chartered also closed significantly lower, down 5.87% and 5.52% respectively, as investor confidence in the sector deteriorated sharply.
Defensive sectors failed to provide support, with utilities - which had gained earlier in the session - reversing course to end in the red.
National Grid declined 1.8%, Severn Trent lost 2.9%, United Utilities fell 1.63%, and SSE slipped 0.39%.
Tobacco firms, typically considered safe havens during market stress, also weakened.
Imperial Brands dropped 2.59%, while British American Tobacco edged down 0.6% after giving up early gains.
BP declined 5.34% following news that chair Helge Lund will step down, likely in 2026.
The move followed pressure from activist investor Follow This, which had called for changes to the board ahead of this month's shareholder meeting.
In contrast, a handful of consumer-facing stocks posted modest gains.
Pub operator Mitchells & Butlers rose 1.44%, while food producers Hilton Food Group and Bakkavor Group closed up 2.39% and 0.22% respectively.
Reporting by Josh White for Sharecast.com.
Market Movers
FTSE 100 (UKX) 8,054.98 -4.95%
FTSE 250 (MCX) 18,365.35 -4.40%
techMARK (TASX) 4,377.60 -4.27%
FTSE 100 - Risers
JD Sports Fashion (JD.) 67.26p 2.94%
RELX FINANCE BV 3.375% GTD NTS 20/03/33 (BW73) 99.72p 0.00%
Diploma (DPLM) 3,720.00p -0.16%
Sainsbury (J) (SBRY) 237.20p -0.92%
Bunzl (BNZL) 3,010.00p -0.92%
Croda International (CRDA) 2,782.00p -0.96%
Whitbread (WTB) 2,433.00p -1.10%
Diageo (DGE) 2,012.00p -1.13%
Berkeley Group Holdings (The) (BKG) 3,620.00p -1.25%
The Sage Group (SGE) 1,189.00p -1.49%
FTSE 100 - Fallers
Rolls-Royce Holdings (RR.) 659.00p -11.66%
Fresnillo (FRES) 822.50p -10.65%
Antofagasta (ANTO) 1,416.00p -9.35%
Glencore (GLEN) 236.90p -9.16%
Airtel Africa (AAF) 149.70p -8.72%
NATWEST GROUP (NWG) 413.40p -8.64%
Anglo American (AAL) 1,832.40p -8.56%
St James's Place (STJ) 817.80p -8.05%
Barclays (BARC) 250.05p -7.70%
Babcock International Group (BAB) 685.50p -7.49%
FTSE 250 - Risers
Hilton Food Group (HFG) 857.00p 2.39%
Ruffer Investment Company Ltd Red PTG Pref Shares (RICA) 284.00p 2.34%
BH Macro Ltd. GBP Shares (BHMG) 381.50p 1.73%
Mitchells & Butlers (MAB) 211.50p 1.44%
Domino's Pizza Group (DOM) 271.60p 0.44%
The Renewables Infrastructure Group Limited (TRIG) 75.20p 0.00%
Tami Senior Securitisation 2 Ltd Cls A-2 Mb Fxd Rte Nts 31/12/23 (Reg S) (BP00) 0.00p 0.00%
Wetherspoon (J.D.) (JDW) 555.00p 0.00%
International Distribution Services (IDS) 365.20p -0.05%
TI Fluid Systems (TIFS) 199.00p -0.10%
FTSE 250 - Fallers
Vistry Group (VTY) 511.20p -12.76%
Harbour Energy (HBR) 173.40p -11.08%
Just Group (JUST) 125.60p -9.90%
Senior (SNR) 126.60p -9.31%
Vesuvius (VSVS) 333.20p -9.01%
Diversified Energy Company (DEC) 915.00p -8.86%
TBC Bank Group (TBCG) 3,680.00p -8.80%
Trustpilot Group (TRST) 193.60p -8.68%
Aston Martin Lagonda Global Holdings (AML) 63.35p -8.39%
Hochschild Mining (HOC) 251.20p -8.32%
