Trade war fears weigh on markets

The FTSE had a slightly choppy day, with a mid-morning recovery cut short by the US markets starting to slide as US-China tensions escalated again.

A set of different media reports coming from the US, most of them still unconfirmed, say that the US might tone down its initial plans to introduce a 25% tariff on $200 billion worth of Chinese goods and instead bring in tariffs of only 10%.

Other news reports are more prominently carrying President Trump’s comments about how the tariffs have put the US in a good negotiating position. Amidst all of this China is saying that it will respond in kind to any US move but more worryingly is threatening to walk away from near term negotiations altogether, which would cement the tariff system for the time being.

The trade tit-for-tat is keeping the markets in Europe, Asia and the US on their toes over the possible escalation of the conflict and is deflecting focus from any other underlying regional drivers, such as the fundamentally fairly strong state of the US economy. The dollar is weaker against the pound, the euro and the yen and is just holding the line against the Canadian dollar.

Unilever shareholders oppose move

The market seems unable to make its mind up over the news that a few top Unilever shareholders plan to try and block the company’s decision to stop having a dual headquarters and to close down its main centre of operations in the UK in favour of a single Dutch HQ.

Shares dipped early on the news but then recovered slightly in the course of the day to trade down 0.22%. Unilever, one of the largest FTSE 100 components with market value of about £124 billion, made the decision to move in March this year causing a rally in the share price.

Analysts speculated that the move was largely forced by Brexit, something the company has repeatedly denied, but UK shareholders are worried that if the company does leave the UK it would no longer be listed in the FTSE 100 and that that would knock share prices, forcing them to sell whether they want to or not.

Brent and WTI prices diverge

Brent crude and West Texas Intermediate oil prices diverged earlier in the day but towards the London close both contracts traded higher, up 0.14% and 0.01% respectively.

Concerns over the impact of US sanctions on Iran are being alleviated by Saudi Arabia, Russia and the US talking to one another about raising output if supplies start declining.

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