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Defensive stocks buoy FTSE 100 before U.S.-China trade deal

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01/15/2020 | 12:10pm EST
Traders looks at financial information on computer screens on the IG Index trading floor

London's main share index rose slightly on Wednesday, hours before the sealing of an initial U.S.-China trade deal, though sentiment was tempered when Washington said tariffs on Chinese goods would not be rolled back immediately.

The FTSE 100 rose 0.3% on a third day of gains, supported by a host of so-called defensive stocks including pharmaceutical giants AstraZeneca and GlaxoSmithKline, which rose nearly 2%, and consumer goods companies.

Investors tend to turn to these sectors at times of macroeconomic uncertainty.

The FTSE 250 ended 0.2% lower, with a 16% plunge in Tullow Oil weighing the most. Tullow said it would take a $1.5 billion writedown after cutting its long-term oil price assumptions.

Investors betting on a quick de-escalation of Sino-American tensions were dealt a blow when U.S. Treasury Secretary Steven Mnuchin said tariffs on Chinese goods would not be repealed until the completion of a Phase 2 agreement.

"Strategic competition between the U.S. and China, especially in tech, is likely to persist despite a limited 'Phase 1' trade deal," BlackRock analysts wrote in their weekly note.

"The U.S.-China trade conflict – 2019's dominant geopolitical risk – has paused, yet we expect enduring strategic rivalry between the two countries."

Banks suffered across the board as weak inflation data further spurred hopes that the Bank of England will cut interest rates in its January meeting. Low interest rates squeeze a lender's margins.

Royal Bank of Scotland, which also had its rating downgraded by Barclays, led the sub-index <.FTNMX8350> down 1% to a one-month low with a 2.5% share price fall.

Keeping a lid on losses on the midcap bourse, Provident Financial jumped 7% after its key credit card business enjoyed a better-than-expected fourth quarter and Hochschild Mining climbed 3% on better-than-expected 2019 production.

Among smaller stocks, fast fashion retailer QUIZ tanked nearly 20% on its worst day since June, as it pointed to poor trading over the key Christmas period.

(Reporting by Shashwat Awasthi and Muvija M in Bengaluru, Editing by Sherry Jacob-Phillips and Shailesh Kuber)

By Shashwat Awasthi and Muvija M

Stocks mentioned in the article
ChangeLast1st jan.
ASTRAZENECA -2.27% 7490 Delayed Quote.-1.41%
BARCLAYS PLC -1.59% 170.68 Delayed Quote.-4.99%
BLACKROCK, INC. -2.43% 523.81 Delayed Quote.4.20%
FTSE 100 INDEX 0.28% 7234.11 End-of-day quote.0.00%
GLAXOSMITHKLINE -2.29% 1783 Delayed Quote.0.20%
HOCHSCHILD MINING PLC -0.65% 168.5 Delayed Quote.-7.92%
LONDON BRENT OIL 0.34% 59.1 Delayed Quote.-6.00%
PROVIDENT FINANCIAL PLC -2.14% 457 Delayed Quote.-0.02%
QUIZ PLC -2.64% 14.75 Delayed Quote.-16.07%
THE ROYAL BANK OF SCOTLAND GROUP PLC -2.28% 218.3 Delayed Quote.-9.24%
TULLOW OIL -2.32% 50.5 Delayed Quote.-21.09%
WTI 0.13% 53.02 Delayed Quote.-9.29%
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