(Reuters) - London’s FTSE 100 shed losses to bag gains as investors flocked to defensive stocks after an exchange of trade threats between the U.S. and China stoked fears of a slide into recession, while a profit warning sent builder Kier to its lowest in two decades.
The main FTSE 100 index ended 0.3% higher, after earlier hitting its lowest level since March 8, while the midcap index lost 0.5%.
China warned the United States at the weekend not to meddle in security disputes over Taiwan and the South China Sea, while President Donald Trump threatened to impose tariffs on all Mexican goods.
In response, investors pooled their money into stocks that are deemed less risky at times of macro-economic uncertainties. AstraZeneca and GlaxoSmithKline led gains on main index, while retail giants Diageo and Unilever also climbed.
The exporter-heavy main index also found support in a dip pound, that came after a survey showed that the Brexit stockpiling boom of early 2019 gave way in May to the steepest downturn in British manufacturing in almost three years.
Construction group Kier was the biggest faller on the FTSE 250 index, down 41% and at its lowest level since early 1999 after a profit warning and growing fears of a dividend cut and another funding-raising due to mounting debts.
Investors kept an eye on Trump’s contentious visit to Britain, which started on Monday and comes at a time of deep political uncertainty ahead of Prime Minister Theresa May’s resignation this week.
Trump over the weekend repeated his backing for candidates to succeed May who have said Britain must leave the European Union on the due date of Oct. 31 with or without a deal.
“Some traders will be keeping an ear out for any comments about the future of UK-US relations, and some dealers are nervous the U.S. President might try his tough tactics on Britain,” David Madden, CMC Markets analyst, wrote.
After recording its first monthly fall this year in May and despite starting off the session on the back foot, the FTSE 100 closed in positive territory and started off the new month on a good note.
“The market is finding it difficult to find a direction... yes they’ve fallen in May, it’s not been nice, but it’s not as bad as you might have expected given the number of salvos that have been fired,” said Antoine Lesne, head of SPDR ETF strategy and research at State Street Global Advisers.
“Which begs the question, where are we heading to?”
Reporting by Muvija M and Shashwat Awasthi in Bengaluru, Helen Reid in London; editing by John Stonestreet and Ed Osmond