Markets braced for further falls

Dealers are bracing themselves for another volatile week on the world's stock markets following last Friday's near 250-point plunge on Wall Street, its second-biggest on record, and the largest one-day fall in London's FTSE 100 index since the 1987 stock market crash.

Analysts expect UK stocks to fall sharply in early trading today in the wake of the drop on Wall Street, which was sparked by worries about US corporate earnings and a drop in the dollar. The Dow Jones Industrial Average closed 247 points lower at 7695 and the FTSE 100 closed 125.5 down at 4866.

"I think market-makers will mark the stock market down reasonably sharply first thing on Monday, probably by another 50 points or so, and then there will be a pause," said Richard Jeffrey, an economist at Charterhouse Tilney. "The market will wait to see whether there's any buying interest at those sorts of levels. If there isn't, I think it will see a secondary markdown, or it might just bounce a little and wait for Wall Street to open."

Market jitters will be compounded by fears that US, German and UK interest rates may have to rise. On Tuesday the US Federal Open Market Committee meets, although analysts believe it will leave interest rates unchanged.

However, there is a growing concern the German central bank, the Bundesbank, might raise base rates on Thursday. The UK government is also expected to announce on Wednesday that annual retail sales grew by as much as 6 per cent in July, heightening fears that the economy is overheating and raising the spectre of higher interest rates.

Equity markets have recently scaled new heights in the UK and analysts were divided over whether Friday's fall marked a temporary blip or the beginning of a prolonged bear market.

"The markets are overvalued. It wouldn't surprise me to see the UK market fall back by another 10 per cent over the course of the summer and autumn," Mr Jeffrey said.

However, most analysts believe that although the fluctuations of the past few days may continue over the coming weeks, a crash on the scale of 1987 is not about to happen.

One senior equity strategist said the market, which had run away with itself in recent weeks, was looking overvalued and the fall was needed to calm things down. Other observers saw the share price fall as offering some buying opportunities. "At 5,100, cash was looking a safer bet, but at these levels, I'll pick up the phone and advise clients to get back into stocks," said Robert Buckland, UK stock strategist at HSBC James Capel.

Buyers are expected to continue to favour second-tier industrial firms over blue-chip stocks.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
Sport
sportWWE latest including Sting vs Triple H, Brock Lesnar vs Roman Reigns and The Undertaker vs Bray Wyatt
Arts and Entertainment
Louis Theroux: By Reason of Insanity takes him behind the bars again
tvBy Reason of Insanity, TV review
Arts and Entertainment
Cassetteboy's latest video is called Emperor's New Clothes rap
videoThe political parody genius duo strike again with new video
Arts and Entertainment
tvPoldark, TV review
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Retirement Coordinator - Financial Services

Negotiable: Recruitment Genius: To provide a prompt, friendly and efficient se...

Recruitment Genius: Annuities / Pensions Administrator

Negotiable: Recruitment Genius: You will be the first point of contact for all...

Ashdown Group: HR, Payroll & Benefits Officer - Altrincham - up to £24,000.

£18000 - £24000 per annum + benefits: Ashdown Group: HR, Payroll & Benefits Of...

Ashdown Group: Learning and Development Programme Manager

£35000 - £38000 per annum + benefits : Ashdown Group: A highly successful, int...

Day In a Page

Election 2015: How many of the Government's coalition agreement promises have been kept?

Promises, promises

But how many coalition agreement pledges have been kept?
The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

The death of a Gaza fisherman

He built his own reef, and was fatally shot there by an Israeli gunboat
Saudi Arabia's airstrikes in Yemen are fuelling the Gulf's fire

Saudi airstrikes are fuelling the Gulf's fire

Arab intervention in Yemen risks entrenching Sunni-Shia divide and handing a victory to Isis, says Patrick Cockburn
Zayn Malik's departure from One Direction shows the perils of fame in the age of social media

The only direction Zayn could go

We wince at the anguish of One Direction's fans, but Malik's departure shows the perils of fame in the age of social media
Young Magician of the Year 2015: Meet the schoolgirl from Newcastle who has her heart set on being the competition's first female winner

Spells like teen spirit

A 16-year-old from Newcastle has set her heart on being the first female to win Young Magician of the Year. Jonathan Owen meets her
Jonathan Anderson: If fashion is a cycle, this young man knows just how to ride it

If fashion is a cycle, this young man knows just how to ride it

British designer Jonathan Anderson is putting his stamp on venerable house Loewe
Number plates scheme could provide a licence to offend in the land of the free

Licence to offend in the land of the free

Cash-strapped states have hit on a way of making money out of drivers that may be in collision with the First Amendment, says Rupert Cornwell
From farm to fork: Meet the Cornish fishermen, vegetable-growers and butchers causing a stir in London's top restaurants

From farm to fork in Cornwall

One man is bringing together Cornwall's most accomplished growers, fishermen and butchers with London's best chefs to put the finest, freshest produce on the plates of some of the country’s best restaurants
Robert Parker interview: The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes

Robert Parker interview

The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes
Don't believe the stereotype - or should you?

Don't believe the stereotype - or should you?

We exaggerate regional traits and turn them into jokes - and those on the receiving end are in on it too, says DJ Taylor
How to make your own Easter egg: Willie Harcourt-Cooze shares his chocolate recipes

How to make your own Easter egg

Willie Harcourt-Cooze talks about his love affair with 'cacao' - and creates an Easter egg especially for The Independent on Sunday
Bill Granger recipes: Our chef declares barbecue season open with his twist on a tradtional Easter Sunday lamb lunch

Bill Granger's twist on Easter Sunday lunch

Next weekend, our chef plans to return to his Aussie roots by firing up the barbecue
Joe Marler: 'It's the way I think the game should be played'

Joe Marler: 'It's the way I think the game should be played'

The England prop relives the highs and lows of last Saturday's remarkable afternoon of Six Nations rugby
Cricket World Cup 2015: Has the success of the tournament spelt the end for Test matches?

Cricket World Cup 2015

Has the success of the tournament spelt the end for Test matches?
The Last Word: Justin Gatlin knows the price of everything, the value of nothing

Michael Calvin's Last Word

Justin Gatlin knows the price of everything, the value of nothing