FTSE 100 hit by interest rate fears

FINANCE: Nearly £50bn was wiped off the FTSE 100 as the London market fell prey to a global stock sell-off sparked by fears that rising inflation could force central banks to hike interest rates. London’s blue chip index ended the day down 2.6 per cent or 193.58 points at 7,414.4 points – marking its lowest close since April 2017.

NEARLY £50BN was wiped off the FTSE 100 as the London market fell prey to a global stock sell-off sparked by fears that rising inflation could force central banks to hike interest rates.

London’s blue chip index ended the day down 2.6 per cent or 193.58 points at 7,414.4 points – marking its lowest close since April 2017 – a decline mirrored by both the German Dax and French Cac 40 – which each dropped 2.3 per cent.

It adds to deep losses during Monday’s session when more than £27bn was wiped off the value of London’s blue-chip stocks and followed a brutal overnight sell-off in Asia and on Wall Street, where the Dow Jones Industrial Average and the S&P 500 dropped 4.6 per cent and 4.1 per cent respectively on Monday.

Tokyo’s Nikkei 225 Day closed down 4.7 per cent, while the Hong Kong’s Hang Seng Index plunged five per cent lower. US stocks continued their descent after markets opened yesterday.

The global equity sell-off has been building since last Friday when traders became spooked by the prospect of tighter monetary policy after the US posted strong average earnings data.

Connor Campbell, financial analyst at Spreadex, said: “The only hope for the markets at the moment is that investors suddenly decide that the sell-off has been a bit overdone – though in a way it is fitting, matching the astonishing, record-breaking recent rise of the global indices with an equally astounding, heart-stopping drop.

“Admittedly, the Bank of England could go some way to allaying investors’ fears of rising interest rates on Thursday, if (governor) Mark Carney issues a more dovish statement than forecast.”

Steven Mnuchin, the US Treasury secretary, sought to calm fears of fresh falls in stock prices yesterday. He told Congress that that the current market sell-off was just a correction in the markets.

Away from the top tier, the FTSE 250 Index suffered a drop of more than 2.1 per cent or 427.93 points to 19,262.56 points.

On the currency markets, the pound was flat at 1.395 against the US dollar and was 0.1 per cent lower versus the euro at 1.127.

Brent crude prices were bucking the market trend, trading around 0.3 per cent higher at $67 per barrel.

David Madden, a market analyst at CMC Markets UK, said: “The volatility in the US dollar is impacting the oil market, but while OPEC and the US play back and forth in terms of curtailed supply and excess supply the energy market may hang around these levels.”

Among Britain’s blue chip stocks, Tesco and Easy Jet were the only two to end the day in positive territory. Tesco rose 1.15p to 199.9p after Kantar Worldpanel data showed that Tesco remained the fastest growing of the big four, with sales up by 2.6 per cent, although its market share fell by 0.3 per cent points to 27.8 per cent.

Easyjet, meanwhile, eked out a 1.5p increase to 1,643p as the low cost airline reported an 8.7 per cent jump in passenger numbers in January. Babcock International dropped 26.4p to 626.2p as the defence supplier cautioned over its full-year sales, amid a slowdown in the market for defence contracts.

Ocado tumbled 16p to 476.5p amid news the online food retailer slumped to a full year pre-tax loss of £500,000.

The only hope ... is that investors decide the selloff has been overdone. Connor Campbell, financial analyst at Spreadex.

BRITAIN’S MAJOR share index had its worst day since the Brexit vote on Tuesday as a violent global sell-off in stock markets and a spike in volatility shook investors.

The FTSE 100 closed down 2.6 per cent at 7,141.4 points at the end of a chaotic day of trading which drove volatility sharply higher.

It suffered its worst daily fall since June 24, 2016, when Britain’s vote to exit the European Union roiled global markets.

The index touched its lowest level since December of that year as investors rushed out of equities, which have surged since the start of the year.

“There’s a sense of relief that we finally have a meaningful correction; it’s long overdue. We have been positioned for it for a while, so we can actually breathe again,” said Christopher Peel, chief investment officer at Tavistock Wealth.

“This type of price action, where you have a correction as severe as it has been, is a great reminder to investors, traders and regulators that it’s not all a oneway bet,” he added.

“It’s ultimately a good thing, so that we get some long-term investors that do have cash on the sidelines selectively adding to their positions.”

Volatility surged across the European market, with the gauge of STOXX 50 volatility posting its biggest one-day gain ever.

The stars of the past months’ rally were the worst fallers on Tuesday. Financials led the slide, taking 53 points off the index. HSBC, Prudentia, Lloyds and Barclays tumbled 2.5 to 4 per cent.

Asset managers also featured prominently among the worstperforming stocks as the global markets ‘melt-up’ reversed, pummelling investors’ portfolios.

Investment trust Scottish Mortgage tumbled 5 per cent as the sell-off in US tech stocks took its toll on the fund, whose top h9oldings include Amazon and Tesla. Asset managers Standard Life Aberdeen and Schroders, and retail investment platform Hargreaves Lansdown dropped 4.4-5.1 per cent, among top fallers.

Hedge fund firm Man Group was the biggest weight on the FTSE 250, its shares tumbling 6.5 per cent.

Oil majors BP and Royal Dutch Shell also took a sizeable chunk out of the blue-chip index as the rout in equities sent crude prices tumbling.

Mid- and small-caps were not spared from the sell-off. The FTSE 250 slid 2.2 per cent, in line with the small-cap index that also suffered its biggest one-day fall since the Brexit referendum.

Ocado shares fell 3.2 per cent after the online supermarket said investment would hold back 201718 earnings, and that it was placing about 5 per cent of its equity.

“Given the balance sheet leverage and the need for capital in respect to Ocado Smart Platform deals, we are not entirely surprised with the share placing,” wrote Berenberg analyst Victoria Maigrot.

“However the timing is unfortunate given the equity market moves we have seen in the US yesterday.”

An outlier was outsourcer Capita whose shares jumped 13 per cent, with traders saying the stock was still feeling the benefit of fund manager Neil Woodford’s positive comments on the company.

But Capita shares were still down 45 per cent from their level prior to its profit warning on January 31.