3-7-18 4:34 AM EST | Email Article

By Carla Mozee, MarketWatch

Rolls-Royce rallies after financial update

U.K. stocks fell Wednesday, tracking losses in U.S. stock futures, after the resignation of White House economic adviser Gary Cohn.

The former Goldman Sachs executive was widely seen as a market-friendly and stabilizing force in the Trump administration. His departure has stoked worries about the likelihood of global trade wars, already a concern for investors.

Among individual stocks, a big winner Wednesday was Rolls-Royce Holdings PLC, as traders reacted favorably to the engine maker's earnings report.

How markets are moving

The FTSE 100 index shed 0.4% to reach 7,120, as the basic materials groups led losses. The industrial sector was moving higher. The London benchmark is on track to break a two-day series of wins after climbing 0.4% (http://www.marketwatch.com/story/ftse-100-climbs-as-fears-of-trade-wars-ease-smurfit-kappa-rallies-2018-03-06) on Tuesday.

European and Asian stocks also lost ground (http://www.marketwatch.com/story/asian-markets-dragged-down-after-gary-cohns-resignation-2018-03-06), while U.S. stocks were setting up for a sharp drop (http://www.marketwatch.com/story/pressure-remains-on-us-stock-futures-after-gary-cohns-resignation-2018-03-07) at the open Wednesday. Futures for the Dow Jones Industrial Average slid more than 300 points, or 1.3%, but were recovering from a drop of more than 400 points (http://www.marketwatch.com/story/stock-market-dollar-rattled-after-gary-cohn-resigns-from-trump-white-house-2018-03-06) soon after the Cohn news.

The pound bought $1.3879, slightly lower than the $1.3888 from late Tuesday in New York.

What's driving markets

Global equities slumped as investors reacted to the news late Tuesday that Cohn is leaving his role as the head of President Donald Trump's National Economic Council. Cohn is seen as the driving force behind U.S. corporate tax cuts that were signed into law last year.

The news comes after U.S. President Donald Trump said he'll impose tariffs on steel and aluminum imports, a move Cohn had opposed. Trump is expected to sign an order this week for across-the-board tariffs of 25% on steel imports and 10% on aluminium imports.

Mining stocks were losing the most in London, as a global trade war sparked by the tariffs could sap demand for metals and weigh on economic growth worldwide. The European Union is seen as likely to release a formal response to the planned tariffs on Wednesday.

Read:How a tariff-rattled stock market is reacting to Cohn's resignation (http://www.marketwatch.com/story/stock-market-dollar-rattled-after-gary-cohn-resigns-from-trump-white-house-2018-03-06)

What strategists are saying

"The implication is that without the restraining influence of Cohn on Trump, the president will now have a free hand to press ahead with further tariffs and generally up the ante on trade," said Neil Wilson, ETX Capital's senior market analyst in a note.

"The question is whether markets heed this call or press on regardless. There is a sense that with Cohn's departure there is a far greater likelihood of things ratcheting up as the EU responds and Trump counters there response and so on," he added.

Stock movers

Rolls-Royce Holdings PLC (RR.LN) shares rallied 12%. The aircraft engine maker swung to a 2017 pretax profit of GBP4.9 billion (http://www.marketwatch.com/story/rolls-royce-profit-climbs-31-for-2017-2018-03-07) ($6.79 million) and said it expects mid-single-digit revenue growth in 2018.

With U.S. steel levies looming, shares of miners traded lower. Anglo American PLC (AAL.LN) fell 1.8%, while iron ore producers BHP Billiton PLC (BLT.LN) (BHP.AU) (BHP.AU) and Rio Tinto PLC (RIO) (RIO) (RIO) gave up 1.6% and 1.5%, respectively.

Shares of Royal Bank of Scotland PLC (RBS.LN) were down 0.3%. The majority state-owned lender late Tuesday agreed to a $500 million settlement (http://www.marketwatch.com/story/rbs-to-pay-500-million-to-ny-tied-to-crisis-era-mortgage-security-sales-2018-03-06) of charges it had sold faulty residential mortgage-backed securities to investors in the runup to the global financial crisis.

Economic data

U.K. house prices rose 1.8% in the last three months to February compared with a year ago, according to data from mortgage lender Halifax. That's slower than the 2.2% annual growth recorded in January. Prices in February grew 0.4% compared with January, after two straight months of declines.


(END) Dow Jones Newswires

March 07, 2018 04:34 ET (09:34 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.
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