Markets Wobble A Trump Announces Tariffs on China

The FTSE fell from its 4-week high on Friday as escalating trade war fears dragged on mining stocks, overshadowing advances in the likes of Tesco and Rolls Royce. The FTSE was moving into the close 1% lower, wiping out all gains achieved across the week. There are growing concerns that a trade war will hit the economy in China, the world’s largest buyer of metals, softening demand. Given basic materials make up 9% of the FTSE’s weighting so it’s easy to see why the index is lagging behind its European counter parts.

 US markets are also showing  signs of nerves as President Trump unveils 25% tariffs on $50 billion of Chinese imports bringing the two powers a step closer to a trade war. Investors had been relatively sanguine to the trade war over recent weeks; however, with the central bank meetings well and truly behind us, full attention can be thrown onto these latest developments, which will probably make for a bumpy if not volatile ride in the markets as the situation unfolds.

China, in its quickness to respond to Trump’s decision, is feeding the markets biggest concern, that these tit for tat measures will continue to escalate, with an increasing number and amount of tariffs and counter tariffs being imposed. This naturally would be very damaging to the economies involved and would be expected to weigh heavily on investor sentiment.

 Tesco impresses as Booker Benefits Show Through

Tesco shares surged 2% to 255p on news that sales rose 1.8% (stores open for more than 1 year) . Whilst other retailers are falling by wayside Tesco had an impressive start to the year, shrugging off the Beast from the East as sales picked up for a 10^th straight month. Benefits from the takeover of Bookers are already showing through as the wholesaler takes advantage of Tesco’s distribution network. With over £200 million in synergies expected to come from this merger, investors are impressed with the ways the tie up has started, pushing shares to a near 4 year high.

 Rolls Royce

Rolls Royce extended gains from the previous session, jumping a further 8% as investors cheered the next steps in restructuring at the historically inflexible firm. Confirmation that the firm is on track to hit £1 billion free cash flow by 2020, after generating less than £300 million cash flow last year has given traders reason to buy in sending the share price as much as 14.5% higher at one point.