Recession fears hang over global economy
As £88bn is wiped off FTSE 100 in just four days . . .
ALMOST £88bn has been wiped off the value of Britain’s bluechip companies as fears over the state of the global economy spooked investors.
As businesses blamed uncertainty generated by Brexit for the slowdown in Britain, a slew of grim economic data raised the spectre of recession in Germany and the eurozone, as well as in the UK.
And there was evidence of decline across the Atlantic, with weak services and manufacturing figures.
Investors have also been unnerved by the impact of President trump’s trade wars with China and now the EU, after Washington on Wednesday was given the green light to impose £6.1bn of tariffs on European goods.
Another £11.3bn was wiped from the FTSE 100 yesterday as it fell 0.6pc, or 44.9 points, to 7077.64. It means the index has lost £87.6bn – or 4.7pc – of its value since the sell-off began on Monday.
A series of reports published yesterday raised fears over the state of economies around the world, including Britain’s. Research group IHS Markit warned the UK faces a ‘heightened risk of recession’ after the dominant services sector slammed into reverse. It also said ‘recession looks to be all but confirmed’ in Germany, while the eurozone has ‘ground to a halt’.
In a further blow to the global outlook, the US services sector grew at its slowest pace in three years amid concerns about tariffs imposed on goods as a result of trump’s tit-for-tat trade war with China. With jitters spreading through financial markets, Neil Wilson, an analyst at Markets. com, said investors are ‘reacting to the signs of a slowdown in the global economy’.
He added: ‘Even the US is not immune.’ Markit said its closely watched Purchasing Managers’ Index for the UK services sector showed a worse-than- expected reading of 49.5 in September, down from 50.6 in August. A figure above 50 indicates growth, while below that represents contraction. the decline in the services sector, which includes a wide range of firms from banks to hotels, has coincided with a contraction in manufacturing and construction. Markit said this points to a potential 0.1pc fall in gross domestic product in the third quarter, which would put the UK in a technical recession, as it follows a 0.2pc decline between April and June.
Meanwhile, a British Chambers of Commerce report warned the ‘UK economy is sagging under the weight of unrelenting uncertainty’ amid a continuing slump in manufacturing.
A survey of 6,600 firms also indicated that manufacturers suffered a ‘significant’ deterioration in the three months to September. Suren thiru, head of economics at the BCC, said: ‘Our findings point to a worrying dropoff in UK economic activity, with unrelenting uncertainty over Brexit and a notable slowing in global growth prospects dragging down almost all the key indicators in the quarter.’