FTSE dips ahead of Trump and Juncker's trade talks

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FTSE dips ahead of Trump and Juncker's trade talks

The FTSE 100 has dipped ahead of US president Donald Trump and European Commission president Jean-Claude Juncker’s summit on trade later today.

The UK blue-chip index fell 45 points, or 0.6%, to 7,665 ahead of the meeting in Washington.

Trump has been in combative mood ahead of the meeting, tweeting yesterday that ‘tariffs are the greatest’.

‘Either a country which has treated the Unites States unfairly on trade negotiates a fair deal, or it gets hit with tariffs. It’s as simple as that,’ he said.

Trump has the European Union’s car industry in his sights. The EU imposes a 10% tariff on US-built cars, while the US levies a 2.5% tariff on cars assembled in Europe and 25% on vans and pick-up trucks.

‘It is quite possible that Trump will end up imposing punitive duties on imported cars from the EU,’ said Commerzbank chief economist Joerg Kraemer.

‘This would have a severe impact on Germany as a car country, and the business climate would also fall significantly.’

UBS analyst Colin Langan has estimated US tariffs on the car industry could hit manufacturers with a 3.7% cost increase under his ‘base case scenario’ of 10% tariffs and up to 12.4% under his worst case scenario of 25% tariffs.

A ‘best case’ scenario of the US and the EU eliminating tariffs on cars was unlikely, he said, as Germany’s manufacturers would be the only beneficiary, with Italian and French companies hurt by the increased competition from US imports.

‘These automakers are not importers to the US and would have little to gain from lower US tariffs, making these countries less likely to vote in favour of lower European tariffs,’ he said.

Outside the FTSE 100, Indivior (INDV +) was the biggest mover, dropping 20.5% to 265.8p as the pharmaceutical company warned of a bigger-than-expected blow from the launch of a generic rival to its flagship opioid addiction treatment.

Indivior warned the market US rival Dr Reddy’s Laboratories’ impending launch of the drug could have a ‘materially higher’ impact than the $25 million hit to 2018 revenues it forecast earlier this month.

The news will be a blow to the stock’s fund manager backers. Indivior is a top 10 holding for three Old Mutual fund managers: Citywire AAA-rated Richard Watts, who runs the £3.6 billion UK Mid Cap +fund, UK Specialist Equity fund manager Tim Service and Luke Kerr, in charge of the UK Dynamic Equity + fund.

The biggest FTSE 250 riser was Brewin Dolphin (BRW +), up 7.3% at 360.8p as the wealth manager reporting a 6.5% jump in funds under management to £42.3 billion.

On the ‘small cap’ index, Ricardo (RCDO +) dropped 11.8% to 826p as the engineering group warned annual profits would be at the lower end of forecasts.

 

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