US-China trade war prompts UK equities sell-off
UK equities fell on Thursday in reaction to Chinese countermeasures against US tariffs, fuelling investors fears of a global recession.
UK stocks tumbled on Thursday after officials in Beijing threatened to take fresh action against US tariffs imposed on $300 billion worth of Chinese exports.
China’s Ministry of Finance said that it will ‘take necessary countermeasures’ against US tariffs.
The sell-off in UK follows declines across major US and Asian indices, with the Dow Jones losing 565 points on Wednesday to close 2.14% lower, while the Hang Seng Index lost more than 400 points to close 1.5% lower.
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FTSE 100 sinks on global recession fears
The FTSE 100, which is comprised of stocks that are more exposed to global events, has fallen by 244 points over the last two sessions, while the more domestically focused FTSE 250 fallen by 177 points over the same period.
Ongoing trade tensions were not the only thing to spook investors, however, with weak economic data coming out of Germany and worrying signs from the bond market.
Bond market flashes recession warning
The sharp drop in the Dow was caused by the 10-year Treasury bond yield slipping near 1.6% on early on Wednesday, with it falling below the yield for the 2-year Treasury bond – the first time this has happened since the 2007-08 financial crash.
On average, long-term bonds offer a better yield than short-term bonds with investors requiring a larger pay-out for having their money locked in for a longer period.
However, that yield curve inverted on Wednesday, which is a sign that investors are growing worried about the strength of the US economy.
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