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FTSE slumps into the red as global sell-off strengthens

FTSE 100 follows other global markets into the red, as fears over higher inflation and interest rates sparks another bond sell-off.

 
FTSE slumps into the red as global sell-off strengthens
 

The FTSE 100 has slumped into the red as a global stock market sell-off strengthened, fuelled by a slump in bonds amid fears over higher inflation and interest rates.

The UK blue-chip index fell 78 points, or 1%, to 7,365, after a sell-off in US markets gathered pace on Friday following the UK market close.

The S&P 500 closed 2.1% lower and the Dow Jones dropped 2.5% after stronger-than-expected US jobs data squeezed the yield on US treasuries to a four-year high of 2.85%.

Asian markets were down sharply overnight, with Japan's Nikkei down 2.6% and Hong Kong's Hang Seng falling 1.1%.

European markets meanwhile weathered the sell-off better, with the German DAX 30 down just 0.3% and France's CAC 40 falling 0.7%.

'Volatility has returned with a vengeance and investors who had been hoping that the new year would see some respite from the selling have been left disappointed,' said Rebecca O'Keefe, head of investment at Interactive Investor.

'European equity markets have now erased all their year-to-date gains as the market has reversed its euphoric start to the year and left investors with nowhere to hide.'

Michael Hewson, chief market analyst at CMC Markets UK, said Friday's US jobs data, which saw 200,000 new jobs added in January and wage growth jump from 2.7% to 2.9%, had prompted investors to reassess the likely path of US interest rate rises.

'The sharp rise in wages appears to have shaken up the market consensus about the pace and scope of the Fed tightening cycle,' he said.

'For a while now investors have assumed that we would probably get another two, maybe even three rate rises this year. Friday's data has prompted a readjustment of that calculus with the potential for a fourth, and this change is likely to drive the US 10-year yield back to 3% in short order.'

Jim Reid at Deutsche Bank said all the ingredients were in place for higher US inflation this year. 'If it doesn't happen this year with all the forces present you'd have to tear up your textbooks really,' he said.

'In terms of what impact higher inflation would have, you only have to see last week's price action for some clues,' he added.

'This move to higher inflation and higher yields probably won;t be a straight line but the risks are building that 2018 could have moments of big adjustments and spikes in volatility.'

On the FTSE 100, few stocks escaped the sell-off, with only a handful making gains. 

Scottish Mortgage (SMT ) was among the biggest fallers, down 2.6% at 444p as a number of growth-focused investment trusts were particularly badly hit by the sell-off. 

The FTSE 250 slumped 1.2%, with Woodford Patient Capital (WPCT ) the biggest faller, down 5.4% at 76.8p.

Capita (CPI) was among the few stocks to make gains, as it recovered a little ground following last week's punishing falls, up 5.8% at 171.7p.

Smaller companies did not escape the falls, with the FTSE Small Cap index down 1.2%.

4 comments so far. Why not have your say?

seaside observer

Feb 05, 2018 at 15:10

I guess this is as anticipated, but it makes me laugh that people are"worried about inflation " a year ago people were" worried about low inflation "

people are just worried that what goes up sharply can fall back somewhat with the ftse up by just over 10% in 17 it would nt take long for that to be wiped out As buffet said if you buy stocks you have to be prepared to lose 20% in a day - sometimes.

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seaside observer

Feb 05, 2018 at 15:10

I guess this is as anticipated, but it makes me laugh that people are"worried about inflation " a year ago people were" worried about low inflation "

people are just worried that what goes up sharply can fall back somewhat with the ftse up by just over 10% in 17 it would nt take long for that to be wiped out As buffet said if you buy stocks you have to be prepared to lose 20% in a day - sometimes.

report this

an elder one

Feb 05, 2018 at 15:57

Yep, the Lemmings are off for a run set off by the manipulators and their crooked ways

report this

CT

Feb 06, 2018 at 09:31

Quite right elder one and Anna Soubry will probably say that this terrible stock market crash is all Theresa May's fault.

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