The FTSE 100 has slumped 1.7 per cent this morning, putting it on course for its worst day in more than four months after US President Donald Trump threatened to impose more tariffs on China.

Trump’s threatened escalation in the trade war, plus tumbling shares in Royal Bank of Scotland (RBS) on the back of a warning over Brexit, pushed the blue-chip index to its lowest point in a month.

Read more: M&A excitement and falling pound put rocket under FTSE 100

RBS dropped six per cent, its most dramatic one-day fall in nine months, after it warned profitability and cost targets for next year could be hampered by deterioration in the economy in the lead up to Brexit.

All major constituent sectors on the index were in the red. Asia-focused stocks such as HSBC were down, and oil majors Shell and BP also fell into negative territory.

Top five FTSE 100 fallers

  • Melrose Industries: -5.8 per cent (180p)
  • Royal Bank of Scotland: -5.7 per cent (205p)
  • Prudential: -5.7 per cent (1,608p)
  • Mondi: -5.4 per cent (1,615p)
  • Antofagasta: -5.2 per cent (855p)

Markets ‘caught unawares’

“Anyone trying to determine the next move in stock markets in the last 24 hours would be justified in feeling like they’ve just experienced a bit of whiplash,” said CMC Markets analyst Michael Hewson.

“It is not hard to underestimate how much this abrupt escalation has caught markets unawares.”

Investment director at AJ Bell Russ Mould said: “What an ugly start to August for global markets. Trump’s latest tariffs on China have put equities into freefall with stock prices marked down sharply.

Top five FTSE 100 risers

  • International Consolidated Airlines Group: +4.5 per cent (432p)
  • Fresnillo: +1.23 per cent (614p)
  • National Grid: +0.9 per cent (864p)
  • Land Securities: +0.9 per cent (798p)
  • Flutter Entertainment: +0.8 per cent (6,550p)
President Donald Trump renewed threats of trade tariffs on China last night (Getty Images)

Trump warning

Trump said he would impose a further 10 per cent tariff on $300bn worth of Chinese importsfrom September and could raise them further if China’s President Xi Jinping fails to agree a trade deal quickly.

It extends tariffs to nearly all of China’s imports into the US and ends a temporary truce to the trade war that has disrupted financial markets.

Read more: Oil prices bounce back after Donald Trump’s China tariffs send them plummeting

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