FTSE drops 3% as global sell-off expands into Europe

Lloyd Doyle
February 6, 2018

European markets were enduring a rough ride on Monday, as the Cac 40 in France dropped 1.5% and Germany's DAX lost 0.8%.

The falls follow a tumultuous night of trading in Asia and the USA as the Japan's Nikkei 225 fell 7.1% at one point, its biggest point drop since November 1990, while the Dow Jones closed down 4.6%.

Earlier 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.

Markets were spooked on Friday by signs of a sharp rise in inflationary pressure in the U.S., prompting fears the Federal Reserve will tighten monetary policy faster than expected.

Yesterday's heavy sell-off in U.S. markets followed mounting investor nerves, with global markets having retreated from all-time highs.

Connor Campbell, financial analyst at Spreadex, said: "The only hope for the markets at the moment is that investors suddenly decide that the sell-off has been a bit overdone - though in a way it is fitting, matching the astonishing, record-breaking recent rise of the global indices with an equally astounding, heart-stopping drop".

'A strong 2017 rally extending into January, low volatility, low interest rates, over-optimism and complacency, over-leverage and financial engineering, all coming to a head as investors react to the possibility of higher/faster interest rates with bond yields creeping higher to jeopardise the current market situation'.

The Scottish Mortgage Investment Trust emerged as the biggest victim of the sell-off dropping 5.5%, but was closely followed by Ashtead Group and Evraz, which plummeted 3.7% and 2.9% respectively. The indiscriminate selling will probably continue until Wall Street finds its first bottom.

In a foreboding sign for the mining-heavy FTSE 100, the Australian Stock Exchange's ASX 200 index saw a 3.3 per cent fall, driven by big falls in energy and industrials stocks.

On the FTSE 100, only a handful of stocks escaped losses, with miners among those to make small gains. Like other commodities, oil is priced in dollars making it more expensive when the United States currency appreciates.

Other reports by Iphone Fresh

Discuss This Article