The FTSE 100 ended Wednesday deep in the red as trade tensions sparked by Donald Trump continue to weigh heavily on equity markets.
London’s top flight closed down 100.08 points, or 1.3%, at 7,591.96 after the US threatened to slap tariffs on 200 billion US dollars (£150 billion) worth of Chinese goods.
The news came just four days after Washington added 25% duties on 34 billion US dollars (£25 billion) of Chinese imports, with Beijing responding by increasing taxes on the same amount of American imports.
Fiona Cincotta, senior market analyst at City Index, said: “The FTSE plummeted 1% in Wednesday’s session… in response to an escalation of the US – Sino trade war, ending a four-day rally.
“A pause in trade rhetoric from the White House had seen stocks climb over the past four sessions, however the threat of tariffs on an additional 200 billion US dollars worth of Chinese imports has since sent equity indices lower, on both sides of the Atlantic.”
The FTSE joined markets across the globe in plunging into negative territory.
In Europe, France’s CAC 40 closed 1.48% down and Germany’s DAX shed 1.53%.
“Heading into Thursday and investors will be on high alert for a Chinese response, with any potential Beijing retaliation, or, equally, a lack of reaction, likely to be what drives trading in the second half of the week,” said SpreadEx’s Connor Campbell.
The pound, still nursing the scars of Tory infighting over Brexit, also ended the session in the doldrums.
Sterling was down 0.3% against the dollar at 1.323 and down 0.2% versus the euro at 1.13.
Brent crude was trading over 3% down at 76.4 US dollars per barrel.
In stocks, Barratt Developments led the FTSE 100 risers after the housebuilder said it would beat profit targets and delivered an upbeat trading statement.
For the year ended June 30, Barratt sold 17,579 homes, up from 17,395 the year before, which the housebuilder said was its highest number of completions in 10 years.
Profit before tax is expected to come in at £835 million, up 9% from £765.1 million, and beating market expectations of £812 million.
Investors warmed to the news, with shares closing up 17p at 500p.
Sky shares ended the day down 7.5p at 1,494p, despite Rupert Murdoch’s 21st Century Fox trumping rival Comcast with a higher bid worth £24.5 billion for the pay-TV broadcaster.
Fox hiked its bid to take full control of Sky to £14-a-share, with all eyes now on Comcast’s next move amid expectations it may improve its £22 billion offer.
Leading the fallers was Micro Focus, which shed 119.5p to close at 1,184p.
The Newbury-based firm swung to a 68.5 million US dollars half year loss due to increased expenses from its acquisition of Hewlett Packard’s software business last year.
The biggest risers on the FTSE 100 were Barratt Developments up 17p at 500p, Kingfisher up 4.3p at 305.8p, Next up 70p at 6,050p and BAE Systems up 7.2p at 655.4p.
The biggest fallers on the FTSE 100 were Micro Focus down 119.5p at 1,184p, Tui down 88p at 1,607.5p, Ocado down 56.5p at 1,046.5p and Glencore down 15.8p at 311.15p.