The FTSE 100 fell on Friday as concerns over China and Hong Kong finally played out in markets after a strong week in global equities.
The FTSE 100 was trading at 6,085, down over 2% just before 4.00pm on Friday.
“It took them a few sessions, but the markets are finally started to pay attention to this week’s China-Hong Kong developments – and what that means for the relationship between Beijing and Washington,” said Connor Campbell, an analyst at online trading company Spreadex.
“With China’s parliament rubber-stamping the new national security laws set to be imposed on Hong Kong, sending armed police to swarm the streets of the administrative region in an attempt to combat pro-democracy protests, Donald Trump has promised to hold a press conference this Friday,” Campbell added.
The real risk to markets is if Donald Trump moves to act against China and in the process reignites a trade war that could further derail a global economy that has been ravaged by COVID-19.
“It will potentially outline the actions the President is set to take against China, the said same vague actions he threatened if China passed the security laws earlier in the week,” Campbell said.
“This has been seen by investors as a step towards escalation, especially since the impending press conference was preceded on Wednesday by the House passing a bill condemning China’s detention and torture of Uighur Muslims.”
Travel shares plunge
However, whilst concerns over China caused a general risk-off sentiment in markets which would usually been played out in commodity shares, the mining sector was relatively flat, and Rio Tinto was even positive going into the close on Friday afternoon.
The biggest losers were in the travel sector that retreated after a strong week on optimism around the commencement of flights.
Carnival was down over 9% and easyJet and International Consolidated Airline were both down over 6%.
Despite the fall of Friday, the FTSE 100 was up 1.6% on the week as the European equity close approached.