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FTSE falls as China reignites global trade war fears

FTSE falls as China reignites global trade war fears

The FTSE 100 has fallen as fears over a global trade war resurfaced with reports China was preparing to retaliate against US president Donald Trump's to impose tariffs on aluminium and steel imports.

The UK blue-chip index fell 35 points, or 0.5%, to 7,026, with other European markets were also down. France's CAC 40 fell 0.3% and Germany's DAX gave up gains to fell into the red, down 0.1%.

The Wall Street Journal reported China was planning tariffs aimed at Trump's support base, targeting US agricultural exports from 'farmbelt' states.

The FTSE 100 was also held back by a rally in the pound after data showed UK wage growth hitting its highest level in more than two years, strengthening the chances of an interest rate rise by the Bank of England in May.

Average weekly earnings excluding bonuses increased by 2.6% in the three months to January, and by 2.8% including bonuses. With inflation at 2.7%, wages are now close to registering real growth.

'That should make it easier for the Bank of England to raise interest rates from their current low level - almost certainly not this week but very likely in May,' said Tom Stevenson, investment director for personal investing at Fidelity International.

'Wage growth has been the missing link in Britain's long, slow recovery from the financial crisis. It is the key to unlocking a return to monetary normality.'

The news pushed the pound 0.4% higher against the dollar to $1.405. A stronger pound tends to hinder the FTSE 100, whose stocks rely on overseas markets for around three-quarters of their earnings.

On the FTSE 100, Kingfisher (KGF) was a heavy faller, down 8% at 310.8p as the owner of the B&Q and Screwfix home improvement chains warned the outlook for the UK retail market was 'more uncertain'.

Among 'mid-cap' stocks software group Sophos (SOPH) jumped 9% to 454.2p, recovering some ground from a two-day sell-off sparked by fears for the technology sector following the share price crash at Micro Focus (MCRO).

Close behind was the Woodford Patient Capital (WPCT) trust, up 7.5% at 78.3p after top holding Prothena (PRTA.O) signed a deal with biotech giant Celgene (CELG.O) that could be worth more than $2.2 billion.

But another Neil Woodford stock, Softcat (SCTS), fell to the bottom of the index, down 12% at 598p as the IT infrastructure company, whose shares had nearly doubled over the last 12 months, succumbed to profit-taking after half-year results. The stock is a 2.2% holding in the Woodford Income Focus fund. 

Among 'small-cap' stocks, Moss Bros (MOSB) tumbled 21.5% to 46p as the clothing retailer issued a profit warning.

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Neil Woodford
Neil Woodford
88/88 in Equity - UK Equity Income (Performance over 3 years) Average Total Return: -4.35%
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