As it happenedended1517933787

FTSE 100 tumbles after worst day for US stocks in more than six years

As it happened: global markets suffer massive sell-off on inflation fears 

Josie Cox
Business Editor
Tuesday 06 February 2018 09:22 GMT
Comments
FTSE 100 crashes as global markets plunge on inflation fears

The FTSE 100 fell sharply on Tuesday, following dramatic sell-offs across the US and Asia, sparked by inflation fears after strong US jobs data triggered a surge in bond yields.

The UK’s benchmark stock index tumbled 3.5 per cent shortly after the market open before recovering somewhat throughout the day, mirroring similar moves across France, Germany and other European markets.

Early on Tuesday, Japan’s Nikkei 225 tumbled 4.7 per cent, marking its worst fall since November 2016 and taking it to a four-month low.

On Monday, the US benchmark S&P 500 fell by more than 4 per cent and the Dow Jones Industrial Average lost 4.6 per cent. Those represented the largest percentage drops since August 2011, but those indices largely regained their footing somewhat on Tuesday.

Traders generally agree that the primary trigger for the global stock rout was a sharp rise in US bond yields after data out of the US on Friday showed wages increasing at the fastest pace since 2009.

That in turn raised the prospect of higher inflation and, as a result, the possibility of higher interest rates.

Here's a look at how the trading day unfolded:

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Welcome to The Independent's liveblog on the global market turbulence. The Dow Jones Industrial Average closed down almost 5 per cent on Monday.

Harriet Agerholm6 February 2018 08:11
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Harriet Agerholm6 February 2018 08:23
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Oil prices have also taken a hit, dropping by more than 1 per cent on Tuesday.

“The fall (in crude futures) is mainly attributable to a global sell off in equities,” Sukrit Vijayakar, director at consultancy Trifecta Energy, told Reuters.

“People ran to the US dollar as a safe haven currency. Therefore the dollar strengthens. This makes commodities more expensive to buy, hence oil futures get sold off."

Harriet Agerholm6 February 2018 08:26
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“Let’s be clear - in the long span of financial history, this is not news,” says James Bateman, chief investment officer for the multi-asset business at fund manager Fidelity International.“Yet in a world where the concept of a ‘correction’ almost feels alien and where equities felt like an unstoppable one-way bet for a while, the normality of a setback can feel more painful,” he added.He said that in the current market environment, “the money is made by keeping your head when others are losing theirs”.

Josie Cox6 February 2018 08:37
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Fear index spikes

The CBOE Volatility index, which is commonly referred to as the “fear-index” because it measures expected near-term stock market volatility, surged by around 20 points its highest level in well over two years.

Josie Cox6 February 2018 08:42
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Revenge of the Bears

“Traders have been looking at the market for the past year moving in one direction which was skewed to the upside,” says Naeem Aslam, chief market analyst at ThinkMarkets.

“Now, it’s time for the Bears to take their revenge and the Dow Jones is set for its worst monthly drop since 2008,” he adds.

Josie Cox6 February 2018 08:57
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A stampede that's hard to stop

“We are not there yet but the chances of this selloff turning into full blown bear market have increased dramatically," says Neil Wilson, senior market analyst at ETX Capital.

"If investors look at underlying earnings growth and the fundamentals of the global economy, there is reason for optimism. However once this kind of stampede starts it’s hard to stop.”

Josie Cox6 February 2018 09:14
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When will investors start 'buying the dip'? 

“We have been anticipating a correction for a long time now, but when markets become over-confident, corrections also become steeper," says Hussein Sayed, chief market strategist at FXTM. 

"It’s hard to tell how far markets may decline, but given that economic fundamentals remain strong, I think investors will start buying the dips sooner than later," he adds. 

Josie Cox6 February 2018 09:15
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Here's a short roundup of some of the reactions coming out of the City this morning.

Josie Cox6 February 2018 09:30
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Checking in on markets...

The UK’s FTSE 100 has recovered slightly but is still down around 1.8 per cent.

The situation is similar elsewhere in Europe, where Germany’s DAX is off 1.9 per cent and Paris’ CAC down 1.6 per cent.

In currency markets, the pound is little changed, at around $1.3982.

Josie Cox6 February 2018 09:50

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