Cyclicals suffer as new Trump tariff threat hits FTSE 100

By Helen Reid and Kit Rees

LONDON (Reuters) - The latest salvo in a trade row between the U.S. and China weighed on Britain's FTSE 100 on Friday, though the damage was limited as mining and bank stocks fell while utilities made gains.

President Donald Trump upped the ante by directing U.S. officials to consider tariffs on a further $100 billion of Chinese imports.

The blue chip FTSE 100 (.FTSE) index ended the session down 0.2 percent at 7,183.64 points, but outperformed the broader European equity market slightly.

The dip hardly dented Thursday's 2.4 percent gains, posted after Sino-U.S. tensions appeared to have eased, and the index stayed near a three-week high, suggesting investors are growing more confident that a full-blown trade war can be averted.

Likewise Friday's comments from White House economic adviser Larry Kudlow that there are ongoing talks on trade between the United States and China helped soothe investor nerves.

Mining and financials stocks, which have been especially sensitive to trade concerns, led losses once again.

Antofagasta (ANTO.L), Glencore (GLEN.L), Rio Tinto (RIO.L), BHP Billiton (BLT.L) and Anglo American (AAL.L) all fell, as did HSBC (HSBA.L) and Barclays (BARC.L).

Retailers were among the worst performers on the FTSE 100 as downgrades from Citi sent Marks & Spencer (MKS.L) and Next (NXT.L) shares down 1.8 and 1 percent respectively.

Strategists at the U.S. bank downgraded Next to a "sell" and M&S to "neutral". In general retail, they said "investors should buy online over offline, Europe over UK and brands over retailers".

Deutsche Bank shifted to a more positive view on general retail, arguing the strengthening of the pound would boost the European sector, which makes a quarter of its sales in Britain.

Investors favoured defensive stocks such as utilities, tobacco companies and telecoms, sought after in volatile markets due to their solid cash-flow and dividends.

United Utilities (UU.L), SSE (SSE.L) and Centrica (CNA.L) gained 1.3 to 2.3 percent. British American Tobacco (BATS.L) was up 0.6 percent, while BT (BT.L) shares rose 1 percent.

Becoming the latest investment house to be relatively more positive on British stocks, UBS closed its overweight in euro zone equities relative to UK equities on Friday.

"Year-to-date euro zone equities have outperformed their UK counterparts by more than 4 percentage points, and we no longer see the catalysts for further outperformance," wrote UBS Wealth Management's Chief Investment Officer Mark Haefele.

On Thursday Citi had upgraded UK equities to "overweight", saying recent underperformance and cheap valuations made the market attractive.

(Reporting by Helen Reid and Kit Rees; Editing by Andrew Bolton)