Trade war hits European stocks

Fiona Cincotta
By :  ,  Senior Market Analyst
European markets are on shaky ground and the FTSE is trading over 1% lower thanks to simmering trade tensions between the US and China. China has started making its retaliatory move on two fronts, firstly threatening to constrict the supply of its rare earth minerals to the US and secondly Huawei has launched a legal case in US courts arguing that the American decision to restrict the world’s largest network equipment maker was illegal.

The potential tightening of China’s rare earth exports would not only cause the cost of specialty metals in the US to spike but could actively impede certain production activity.

The pound is notching lower as the UK’s two main parties are redefining their Brexit positions following European elections and Labour is getting ready to announce its backing for a second referendum. All this politicking seems too much for sterling which has been in decline for all of this week.  

Marks & Spencer is in a precarious position as it could end up losing its spot among FTSE 100 stocks next week when index provider FTSE Russell undertakes its quarterly review. This morning’s 5.5% decline will not help the company’s case as its market capitalization is now close to GBP4 billion.

 European steel production

ArcelorMittal’s decision to cut production of steel in Europe because of weak demand will sound warning bells for economists as steel demand can be seen as an indirect indicator of Europe’s economy. The metal is used by key industries such as construction, energy and car production and weaker demand points to constrained growth.

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