Stock markets tumble as Haldane warns of ‘massive shock’

WALL Street stocks tumbled to their lowest level since March 2021 and the FTSE 100 fell sharply amid fears over a “massive shock to the system” from inflation. It was the worst one-day decline for global markets since the early months of the pandemic, with the FTSE All-world index of equities losing 3pc, its sharpest decline since June 2020.

The sell-off dragged most of the companies in the S&P 500 in the red, with the index sliding more than 3pc. The Nasdaq lost more than 4pc as investors offloaded tech stocks, which are often loss-making or considered high risk.

The FTSE 100 fared only marginally better, dropping 2.3pc as Britain is also fearing recession following last week’s dire economic outlook from the Bank of England. There were also sharp falls on the Continent. It came as Andy Haldane, former chief economist at the Bank of

England, told LBC radio: “We have a whole generation now of mortgage holders, who have scarcely experienced a rise in interest rates, much less one that leads them picking up to, I don’t know, 3, 4, 5, 6pc. This is going to be a massive shock to the system, not just financially but psychologically.”

Investors are worried about efforts by the US Federal Reserve to battle inflation at a time when it is being fuelled by surging energy prices owing to the war in

Ukraine and shipping chaos because of China’s lockdowns. The US central bank raised rates from 0.5pc to 1pc last week, in its first increase of more than 0.25 points since 2000. The Bank of England also increased rates and warned that Britain faced recession later this year.

The moves are intended to slow the economy and prevent overheating by making it more expensive to borrow. The risk is the Fed could cause a recession if it moves too far or too quickly.