London close: Stocks join global rout on trade war fears

(Sharecast News) - London stocks fell sharply on Monday as concerns over a potential trade war weighed on investor sentiment.

The FTSE 100 index dropped 1.04% to close at 8,583.56 points, while the FTSE 250 declined 1.14% to 20,711.76 points.

Market jitters were sparked by comments from US president Donald Trump, who over the weekend announced plans to impose a 25% tariff on imports from Canada and Mexico, alongside a 10% tariff on Chinese goods.

In currency markets, sterling rose 0.17% on the dollar to trade at $1.2416, and gained 0.58% against the euro, changing hands at €1.2029.

"As European markets head towards the close, the volatility continues," said IG chief market analyst Chris Beauchamp.

"US markets opened sharply lower, joining the rest of the world in the red as investors opted to crash out of risk assets in favour of the dollar, yen and gold.

"Trump's tariffs, and their severity, have caught investors on the hop, but the strong rhetoric coming from all sides suggests that this will not be a short-lived trade war."

Beauchamp noted that fresh ISM data out during the afternoon showed that prices were continuing to rise in the US, "adding fuel to the fire", and increasing fears that the Fed would need to hike rates this year.

"All of this is a far cry from the record highs seen in US indices just a couple of weeks ago.

"Traders around the globe are scrambling to work out the impact of the tariffs on earnings, but much of the impact will be dependent on retaliatory tariffs by Canada and others, and in turn any US retaliation.

"Faced with these unknowns, it seems probable that richly-valued US stocks like the 'Magnificent Seven' will continue to suffer losses as investors look to book gains and wait out the storm."

Tariff war in focus, UK manufacturing data paints mixed picture

Global trade tensions remained at the top of the agenda, after Donald Trump announced a temporary pause on proposed tariffs against Mexico late in the afternoon.

In a statement on Truth Social, Trump confirmed that negotiations would take place over the next month, led by senior officials from the State, Treasury, and Commerce departments, alongside representatives from Mexico.

However, concerns over broader trade policy persisted as the president reiterated plans for a 25% tariff on Canadian and Mexican imports, a 10% tariff on Chinese goods, and potential levies on the European Union and the UK.

On home shores, UK manufacturing data offered a mixed picture.

The S&P Global purchasing managers' index (PMI) for January was revised slightly higher to 48.3 from a preliminary 48.2, recovering from December's 11-month low of 47.0 but still below the 50-point threshold that separates expansion from contraction.

The sector saw declines in output, new orders, employment, and stock purchases, while supply chain disruptions stemming from the Red Sea crisis led to longer shipping times.

Business confidence remained near its lowest level in two years, with firms citing government policy, recession fears, and rising costs as key concerns.

Employment in the sector also fell at the fastest rate in 11 months due to layoffs and restructuring linked to higher labor costs.

Rob Dobson, director at S&P Global Market Intelligence, said there was "little scope for any imminent improvement" across the sector due to weak demand and rising cost pressures.

"A stagnant economy and rising cost burdens leave policy makers with a real dilemma, balancing the need for rate cuts to support flagging growth and a declining labour market against the need to contain inflationary pressures," he said.

On the continent, eurozone inflation edged up to 2.5% in January from 2.4% in December, driven by rising energy costs, according to Eurostat's flash estimate.

Core inflation pressures eased slightly, with services inflation slowing to 3.9% from 4.0% and food, alcohol, and tobacco prices rising 2.3% compared with 2.6% a month earlier.

Meanwhile, manufacturing activity in the bloc showed signs of stabilising.

The eurozone manufacturing PMI improved to 46.6 in January from 45.1 in December, an eight-month high, though still firmly in contraction territory.

Further afield, China's manufacturing sector also lost momentum last month, with the Caixin PMI falling to 50.1 from December's 50.5, marking a four-month low.

While the reading remained in expansionary territory, it suggested that growth in the world's second-largest economy remained fragile as demand weakened.

Miners in the red, Vodafone rises ahead of trading update

On London's equity markets, mining stocks were among the biggest fallers as weaker metals prices dragged Antofagasta down 2.55%, Glencore 2.57%, and Anglo American 1.83%.

Scottish Mortgage Investment Trust slumped 4.05%, underperforming the broader market.

The trust, which holds stakes in major US technology firms, struggled amid trade war concerns across the pond.

Barclays lost 2.17% after an IT outage left customers unable to access their accounts on Friday and Saturday, raising concerns over potential regulatory scrutiny.

Fellow banking giant HSBC dropped 2.77% following a downgrade from Deutsche Bank, which shifted its rating to 'hold' from 'buy' after recent share price gains.

Distilling giant Diageo fell 3.05% as investors assessed the potential impact of US tariffs on imports from Mexico and Canada, which could affect the company's supply chain and pricing on its tequila and Canadian whiskey brands.

On the upside, Vodafone gained 1.9% ahead of its third-quarter trading update on Tuesday.

International Consolidated Airlines Group added 0.44% after JPMorgan reaffirmed its bullish stance, naming the British Airways and Iberia owner its top pick for 2025.

Energy stocks were also in demand, with Diversified Energy Company rising 2.06% and Energean up 2.59%, supported by higher oil prices.

Reporting by Josh White for Sharecast.com.

Market Movers

FTSE 100 (UKX) 8,583.56 -1.04% FTSE 250 (MCX) 20,711.76 -1.14% techMARK (TASX) 4,719.87 -1.17%

FTSE 100 - Risers

Coca-Cola HBC AG (CDI) (CCH) 2,866.00p 1.99% Vodafone Group (VOD) 70.02p 1.95% Fresnillo (FRES) 709.50p 1.94% BT Group (BT.A) 143.55p 1.16% Admiral Group (ADM) 2,727.00p 0.89% International Consolidated Airlines Group SA (CDI) (IAG) 340.60p 0.80% 3i Group (III) 3,933.00p 0.74% Imperial Brands (IMB) 2,734.00p 0.74% National Grid (NG.) 986.20p 0.65% BAE Systems (BA.) 1,231.00p 0.57%

FTSE 100 - Fallers

JD Sports Fashion (JD.) 84.96p -4.67% Scottish Mortgage Inv Trust (SMT) 1,041.00p -4.05% Pershing Square Holdings Ltd NPV (PSH) 4,112.00p -3.97% Croda International (CRDA) 3,224.00p -3.59% Weir Group (WEIR) 2,354.00p -2.97% Ashtead Group (AHT) 5,154.00p -2.86% HSBC Holdings (HSBA) 821.60p -2.85% Associated British Foods (ABF) 1,848.50p -2.81% Standard Chartered (STAN) 1,063.00p -2.66% Alliance Witan (ALW) 1,290.00p -2.57%

FTSE 250 - Risers

Foresight Group Holdings Limited NPV (FSG) 405.00p 2.79% Diversified Energy Company (DEC) 1,341.00p 2.60% Energean (ENOG) 950.50p 2.59% Pennon Group (PNN) 464.60p 2.27% Barr (A.G.) (BAG) 615.00p 1.31% HICL Infrastructure (HICL) 114.40p 1.24% PPHE Hotel Group Ltd (PPH) 1,320.00p 1.15% Bakkavor Group (BAKK) 135.00p 1.12% Trainline (TRN) 360.00p 1.11% International Public Partnerships Ltd. (INPP) 113.40p 1.06%

FTSE 250 - Fallers

Ferrexpo (FXPO) 103.60p -6.50% Wood Group (John) (WG.) 68.30p -5.73% Oxford Nanopore Technologies (ONT) 139.20p -4.53% Raspberry PI Holdings (RPI) 732.00p -4.44% Discoverie Group (DSCV) 618.00p -4.04% Wizz Air Holdings (WIZZ) 1,238.00p -3.73% Harworth Group (HWG) 171.00p -3.71% Syncona Limited NPV (SYNC) 92.00p -3.68% Renishaw (RSW) 3,475.00p -3.61% Investec (INVP) 501.00p -3.56%