Stock markets fall at fastest rate since Brexit vote

Analysts point to concerns about central banks stimulus and the health of Hillary Clinton

Ben Chu
Monday 12 September 2016 12:23
Hillary Clinton waves after leaving an apartment building in New York
Hillary Clinton waves after leaving an apartment building in New York

Stock markets are falling at their fastest rate since the UK's Brexit referendum result as investors fret that central banks around the world are easing up on their monetary stimulus policies and concerns grow about the health of Hillary Clinton and the implications for the US Presidential election in November.

The FTSE 100 has fallen 1.6 per cent and is now trading at its lowest level since the beginning of last month.

Almost every company in the UK blue chip benchmark index is down.

Shares in Europe are also sharply lower, with the German Dax and France's CAC both off by 2 per cent.

Italy’s MIB is trading 2.6 per cent down on last week’s close.

Markets are on course for their biggest daily falls since the 24 June sell-off immediately after a majority of the UK electorate voted to quit the European Union.

Stock markets in Asia were hit hard overnight, with Korea’s main index closing down 2.28 per cent and Japan’s Nikkei 225 down 1.73 per cent.

Hong Kong's Hang Seng index dropped 3.4 per cent - its biggest fall since February.

“Investors [are reacting] to heightened fears about, firstly, a Fed rate hike next week and and what it means for diverging global monetary policy, and, secondly, a new layer of political event risk as questions are asked about the health of Hillary Clinton and what that means for an already 'interesting' US presidential race set to conclude in just months” said Mike van Dulken of Accendo Markets.

The US Democratic presidential candidate Hillary Clinton has cancelled a two day campaign trip to California after being diagnosed with pneumonia and seeming to stumble at the weekend's 9/11 commemorations in New York.

"Some are worried that this could ultimately end her bid for the presidency if she doesn’t recover swiftly" said David Cheetham of XTB.

FTSE 100 lowest since early August

Reuters Eikon

Concerns over the direction of central bank policy were first stoked last week when a normally dovish member of the Federal Reserve board, Eric Rosengren, last Friday said there was a “reasonable case” for an increase in US interest rates later this month.

The Fed's meeting on 20-21 September will be the penultimate gathering before the US presidential election on 8 November

Also last week the President of the European Central Bank, Mario Draghi, said the ECB’s council had not even discussed extending its Quantitative Easing programme in its latest meeting, despite stubbornly subdued consumer price inflation in the eurozone.

Many financial market traders were caught off guard by both comments, prompting a shares sell-off.

Last Friday America's S&P 500 experienced its largest fall since late June, closing down 2.45 per cent.

Shares suffered major falls in the wake of the unexpected Brexit vote on 23 June - but recovered well in the subsequent weeks as the shock abated.

On Friday 24 June the FTSE 100 fell 3.15 per cent and 2.55 per cent the following Monday.

Biggest fall since Brexit vote

Reuters Eikon

The stock market falls elsewhere were even larger.

On 24 June Germany's DAX lost 6.82 per cent, France's CAC fell 8.04 per cent and Italy's MIB fell 12.48 per cent.

The S&P 500 lost 3.59 per cent and the Nikkei 225 fell 7.92 per cent.

John Nelson, chairman of Lloyd's, speaks on Brexit

"There are signs the post-Brexit 'golidilocks' backdrop of better growth data and falling rates may be turning and investors do not seem positioned for it" said Keith Parker of Barclays.

“It's a pretty broad-based sell-off on an increasing view that perhaps central banks are going to draw back from providing ever more easing,” said Cathal Kennedy of RBC.

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