LONDON MARKET MIDDAY: Sell-Off Deepens Amid China's Rare Earth Threat

LONDON (Alliance News) - The FTSE 100's losses steepened by midday as the blue-chip index traded nearly 100 points lower following surprisingly soft jobs data from Germany and a warning China could up the ante in its ongoing trade war with the US.The FTSE 100 was down 95.73 points, or 1.3%, at 7,173.22 Wednesday midday. The FTSE 250 was down 193.61 points, or 1.0%, at 19,011.32. The AIM All-Share was down 0.8% at 957.46.The Cboe UK 100 index was down 1.3% at 12,164.52. The Cboe UK 250 was down 0.9% at 17,113.53 with the Cboe UK Small Companies 0.1% lower at 11,826.99.Over in mainland Europe, the CAC 40 index in Paris and the DAX 30 in Frankfurt were down 1.6% and 1.1%, respectively."There's been some notable selling in stock markets this morning with European bourses trading firmly lower and US futures are pointing to a red open on Wall Street with some disappointing employment data from Germany and fading hopes of a US-China trade deal at next month's G20 summit weighing on risk appetite," said David Cheetham, chief market analyst at XTB."Despite a stellar start to the year there remains a feeling that all is not well for stock markets," he added.Taking economists by surprise, Germany's unemployment climbed sharply in May for the first time in nearly two years.The number of unemployed rose by 60,000 month-on-month, while economists had expected a decline of 7,000. In April, there was a fall of 12,000.The jobless rate climbed to 5.0% in May, equalling the rate seen in February. Economists had expected the rate to remain unchanged at the record low of 4.9% logged in each of the previous two months. While this data could be explained by a statistical reclassification, said XTB's Cheetham, it is "another potential alarm bell".To come in the economic calendar on Wednesday are US MBA mortgage applications at 1200 BST followed by the Redbook index at 1355 BST and the Bank of Canada's latest interest rate decision at 1500 BST.In New York, stocks are pointed downwards with the Dow Jones and S&P 500 on course to slide 0.7% and the Nasdaq called to shed 0.9%.Fuelling trade war anxieties on Wednesday, Chinese state media warned that the world's second largest economy could use rare earths as another weapon in the trade war.Government mouthpiece People's Daily on Wednesday implied China could restrict the sale of rare earths - chemicals used in the making of a wide range of products including consumer electronics and military equipment.Although the US has so far slapped tariffs on USD250 billion worth of Chinese imports, it has spared rare earths. About 80% of its rare earth imports come from China, which has for years dominated the global market."At present, the US completely overestimates its ability to manipulate the global supply chain," the People's Daily editorial said, adding that industries in China and the US are "highly integrated" and that there would be "no winner" in a trade war."In the future, don't say that we didn't warn you beforehand!" the paper said.Kit Juckes, a strategist at Societe Generale, said the suggestion China is willing to use exports of rare earths as a bargaining tool in trade negotiations has been a "major driver" of risk aversion.Among the stocks hindering the FTSE 100 on Wednesday was online grocer Ocado, down 5.0%. This was despite figures showing the firm grew sales and its market share over the past 12 weeks.Discount grocery chains continued to attract customers in the UK, with nearly one million more households visiting Aldi compared with last year and an additional 630,000 shopping at Lidl, data from Kantar showed. Kantar said Aldi and Lidl reached a combined record market share of 13.8% in 12 weeks period ended May 19, and the sales were worth a collective GBP344 million more than this time last year.Among the big four UK retailers, Tesco saw flat sales in the period and its market share slipped to 27.3% from 27.7%. J Sainsbury recorded a 1.7% drop in sales and its market share shrunk to 15.2% from 15.7%.Wm Morrison Supermarkets sales fell 0.4% in the 12 week period, while its market share declined to 10.4% from 10.5%.Tesco was down 2.9%, while J Sainsbury was down 0.2% and Wm Morrison down 0.9%.Ocado saw 6.4% growth in sales, while its market share grew to 1.3% from 1.2% in the recent 12 weeks.Oil majors were also among the session's losers, with BP down 1.2% and Royal Dutch Shell 'A' shares 1.3% lower with 'B' shares down 1.7%. Oil was quoted at USD68.64 a barrel at midday, down from USD69.80 late Tuesday.Oil firms in the FTSE 250 also slipped, with Cairn Energy down 4.0% and Premier Oil down 3.7%. Diploma gained 1.8% after JPMorgan started the technical products and services provider with an Overweight rating.Meanwhile, Stobart Group surged 11% as it reported a sharp rise in revenue for its recently-ended financial year. Revenue from continued operations for the year ended February 28 totalled GBP146.9 million, up 39% from GBP105.4 million, as Aviation division revenue jumped 53% to GBP39.4 million from GBP25.8 million.Adding to this, Energy division revenue rose 19% to GBP65.1 million from GBP54.7 million and Rails & Civils revenue grew 28% to GBP52.3 million from GBP41.0 million.Stobart - an aviation, energy, and civil engineering company - posted a pretax loss of GBP42.1 million, swinging from a GBP109.3 million profit the year before.According to Stobart, the loss reflected investment in its Aviation and Energy division, as well as one-off legal costs and non-cash items "resulting from the intention to ensure a de-risked balance sheet".