British stock markets wobbled lower on Wednesday as signs of an escalation in the China-US trade conflict, coupled with growing worries of a no-deal Brexit, hurt demand for risk. The main index gave up 1.2%, while the more domestically focussed midcap market, more vulnerable to Brexit jitters, tumbled to a 2-month and ended closed down 1.4%.
All 10 blue-chip sectoral indices were in the red. China's Communist Party newspaper warned on Wednesday that Beijing was ready to use its dominance in rare earths to strike back against the United States in their increasingly bitter trade dispute. London's listed mining companies, focused on conventional industrial metals and a large part of the blue-chip index, slipped 2% on its worst day in nearly three months amid worries about the trade war's effect on global demand.
Asia-exposed banks HSBC and Standard Chartered were also hit, while oil majors BP and Shell also dragged down the main index as crude prices sank 2%. "Risk aversion has been on the rise as investors grow increasingly concerned over the impact that the ongoing trade dispute is having on the global economy," London Capital Markets analyst Jasper Lawler wrote.
"Weakening macro data is heightening these concerns, fuelling fears of a global recession. An unresolved Brexit and rising tensions between Rome and the European Commission are adding to the gloomier outlook." Tesco fell 5.2% to a three-month low after a Kantar Worldpanel report showed Britain's "Big Four" supermarkets continued to lose market share. Rivals Sainsbury's and Morrisons were also hit.
British American Tobacco and Imperial Brands lost over 2%, a day after data from Nielsen showed cigarette industry volumes fell in the four weeks to May 18.
Defensive stocks, including utilities Severn Trent and National Grid, considered less risky in times of political and economic uncertainty, also gained about half a percent each.
The flip side of the mining risk was a rise in prices of gold, considered a safe haven. Fresnillo eked out slight gains, while African venture Rainbow Rare Earths Ltd surged 26%. Support services group Stobart added 6% on the FTSE 250 after reporting a 39% surge in full-year revenue on the back of strong performances in aviation and energy.
However, the index was weighed down by weakness in sterling due to the return of concerns over the potential for a no-deal Brexit after the Irish finance minister said it is too late to tweak the Irish "backstop" mechanism in Britain's EU withdrawal agreement.