Shares on the London Stock Exchange took a hammering today amid concerns that global growth is slowing, the Delta variant of Covid-19 is s...
Shares on the London Stock Exchange took a hammering today amid concerns that global growth is slowing, the Delta variant of Covid-19 is spreading and central banks will pull monetary stimulus sooner than expected.
At 1300, the FTSE 100 index was down 1.9 per cent or 136.2 points to 7,033.1. The FTSE 250 index, which is more UK-focused, was down 0.9 per cent or 206.6 points to 23,629.9.
France's Cac-40 was 2.5 per cent down in Paris, while Frankfurt's DAX was 1.7 per cent off.
'A theme that has developed across markets is that the spread of the Delta variant is a larger economic issue, compared to what investors were pricing in, which is weighing on economy-sensitive sectors like commodities,' James Smith, an economist at ING, said.
After minutes from the latest US Federal Reserve meeting were published, suggesting stimulus could be eased sooner than anticipated, shares on Wall Street fell last night before the sell-off spread to Asian markets and across Europe this morning.
The market falls leave the FTSE 100 index at around a three-week low, only just above its key 7,000 level. It was dragged down particularly by miners' and energy giants' losses over weaker commodity prices.
Shares in London-based miner Anglo-American are down over 11 per cent to 2,876.50p, while Antofagasta has seen its share price drop over 5 per cent to 1,394.00p.
Oil prices have dropped for a sixth straight session to a three-month low, while growth bellwether copper also fell. Brent crude oil is down 2.28 per cent, at around $65.96 a barrel.
Richard Hunter, head of markets at Interactive Investor, said: 'In the UK, the market is not immune from the growing level of global considerations and has also been under some pressure amid lighter summer trading volumes, which tend to exacerbate share price movements.
'In addition, the FTSE 100 is being additionally hampered by the general weakness in commodity prices and a clutch of stocks being marked ex-dividend.'
But, he added: 'Despite the wall of worry which investors are being forced to climb and another feeble round of opening trades, the main indices are still comfortably in positive territory for the year, with the FTSE 100 remaining ahead by 9% and the FTSE 250 by 15%.'
Drops in the share price of high market-cap constituents like BP, Royal Dutch Shell and HSBC also dragged on the blue-chip index today.
On the slide: Shares in London-based Anglo-American have plummeted today
Markets took a hit after minutes from the latest US Federal Reserve meeting surfaced.
While the Fed made no firm decisions, 'most participants… judged that it could be appropriate to start reducing the pace of asset purchases this year.'
The US central bank's $120billion a month bond purchases have helped cushion markets from the impact of the pandemic, but officials now look ready to start to withdraw the support sooner than initially anticipated.
Fears that central banks in general will scale back asset purchases rapidly due to rising inflation are sending nervous traders to the sell button.
Jitters: Shares on Wall Street fell after the latest US Federal Reserve minutes were published
'The Bank of England has already seemed to have begun its tapering process with the speed of its bond buying actually slowing since May this year', IG's Smith, said.
Andrew Hunter, senior US economist at Capital Economics, said: 'With a growing number of officials now openly discussing the possibility of tapering beginning soon on the back of July’s strong employment report, it looks more likely than not that the wind-down will begin later this year, rather than early next year as we had previously thought.
'A final decision won’t be made until the September FOMC meeting at the earliest and will probably depend on another solid rise in payrolls in August, but Fed Chair Jerome Powell could now use his Jackson Hole speech next week to drop a stronger hint that tapering is on the way.'
He added: 'Officials seemingly didn’t come to any firm decisions on the pace or composition of tapering either, but the minutes do at least appear to put to bed the idea that the Fed’s $40bn monthly MBS [mortgage-backed securities] purchases could be reduced quicker than their $80bn of Treasury purchases, with most officials in favour of reducing them at the same rate.'
Hinesh Patel, portfolio manager at Quilter Investors, said: 'Today’s market moves and the minutes from the Federal Reserve’s latest meeting serve as a wake-up reminder for just how much markets are conditioned to be running on central bank support.
'Markets have become addicted to the sheer volume of money that has been available and this is clearly going to be a drawn-out process to reduce the liquidity it has become so accustomed to.'
Mounting concerns over the situation in Afghanistan and fears that the Chinese economy is ailing added to market jitters.
In the red: The FTSE 100 index and the FTSE 250 index are firmly in the red today
No comments