The UK’s benchmark FTSE 100 stock index tumbled this morning as investors faced a perfect storm of political turmoil in Westminster and British companies being dragged in to the US-China trade war.
The blue-chip FTSE 100 had fallen 1.5 per cent by 11.30am, taking it to 7,225.8 as multiple factors drove a sell-off.
Prime Minister Theresa May has come under huge pressure to resign in the coming days following a cabinet revolt last night over her tweaked Brexit proposal that would let MPs vote on a second referendum.
May's woes are set to worsen today as Britain heads to the polls to vote in a European election that is expected to see Nigel Farage's Brexit party trounce the Conservatives.
Leader of the House Andrea Leadsom tendered her resignation last night, saying she could not support a bill that contained a proposal to let MPs vote on a second referendum.
Meanwhile, the trade war between the US and China rages on and has dragged UK companies into the fray.
British chipmaker Arm has paused its dealings with Chinese tech giant Huawei, while EE and Vodafone have both blocked it from their 5G launches this summer.
Trump has opened up a line of attack on Huawei as part of his trade war with China, which has seen his administration ratchet up tariffs on $200bn worth of Chinese goods to 25 per cent from 10 per cent.
While a weaker pound ought to be pushing the index upwards as it makes the goods and services of UK exporters cheaper, market pessimism has cancelled out any uplift.
Sterling had fallen 0.2 per cent against the dollar by 11.30am to buy $1.264, having bounced after falling to a fresh four-month low this morning.
Neil Wilson, chief market analyst at Markets.com, said: “The problem for the FTSE today is that half of it is exposed to global trade fears – miners, oil, etc – while the other half that’s exposed to the UK economy is being whacked by worries that there is a greater chance of a no-deal or hard Brexit once Theresa May resigns.”
Asian markets ended the day in the red yesterday as the trade war spooked investors. China’s benchmark Shanghai composite index fell 1.4 per cent, while Honk Kong’s Hang Seng index fell 1.6 per cent.
European markets have followed their Asian cousins downwards this morning. Germany’s manufacturing-heavy Dax stock index had fallen 1.9 per cent by 11.30am. France’s CAC 40 index had fallen 1.8 per cent.