British stocks plunge in worst day for 2020 as US-China Trade War intensifies

Investors avoided risky assets on Friday after China's retaliatory duties against the United States raised fears of a global economic recession.

The blue-chip FTSE 100 reached a three-month-low, down almost 5% – its biggest daily drop since March 2021, when the world markets plummeted due to COVID-19.

The midcap index fell 4.4% and closed at a record low of 16 months.

Investors rushed to government bonds and sold stocks, causing the blue chip index and midcap index to see their largest weekly declines in 5 years.

The trade war between two of the world's largest economies intensified when, currently facing tariffs of 54% on its exports to the U.S.

Federal Reserve Chair

Jerome Powell

In remarks that indicated the difficult decisions the central bank may have to make, Trump said the new tariffs were "larger than anticipated" and that the economic fallout, including higher inflation and slower GDP, would also be larger.

In President Donald Trump's time, Britain had the lowest import tariff rate in the world at 10%

Tuesday's tariff announcement

Officials acknowledged that the country was vulnerable to economic downturns around the world.

British Prime Minister

Keir Starmer

Will speak with other world leaders on the changing "global economic environment" over the weekend.

JD Sports Fashion was the only stock that gained ground, but all other stocks, including the FTSE 100, fell on the day.

Aerospace and defense led the sectoral declines with a 9% drop.

Investors worried about the growth of the world's biggest economy, and priced in many more rate cuts by central banks amid concerns over tariffs. The banking sector fell 6.3% in a three-month high.

The indexes of precious metal and industrial metal miners fell by 8.5% and 7.5% respectively.

As traders liquidated their gold positions after the market's sell-off, gold prices dropped by nearly 2%.

Copper is on course to have its largest daily decline since the beginning of the COVID-19 pandemic in 2020.

Oil and Gas stocks dropped 7.1%, as oil prices fell nearly 8%.

Shell, a heavyweight company, was the largest drag on the FTSE 100. It fell by nearly 7%.

BP fell 7.4% following an announcement by Helge Lind that he intends to step aside "likely in 2026." This comes amid a campaign from activist hedge fund Elliott calling for more changes at the oil giant.

The U.S. Labor Department has reported that the number of jobs in March was higher than expected, but Trump's trade tariffs could weaken the labor markets as the business confidence falls.

The construction industry in Britain shrank dramatically last month. Civil engineering declined at its fastest rate since 2020. Reporting by Ragini Mathur and Sanchayaita in Bengaluru, editing by Shilpa Majumdar and Andrew Heavens

(source: Reuters)