Financial market turmoil deepens amid rate rise fears

● £50 billion wiped off London’s top flight index as Wall Street swings

More than £50 billion was slashed from London bluechip shares yesterday as market volatility struck for a second consecutive day amid worries that central banks – particularly the US Federal Reserve – could instigate early interest rate rises.

London’s blue-chip FTSE 100 index joined the downward spiral, closing down 2.6 per cent, or 193.58 points, at 7,414.40 – its lowest close since April 2017.

Paris and Frankfurt were also rattled, both closing off 2.3 per cent, the European bourses catching the jitters that had hit Asian markets overnight. Among the biggest Far East losers was Tokyo’s Nikkei 225 index, which shed 4.7 per cent in value.

Hong Kong’s Hang Seng index skidded 5 per cent, while the South Korean market closed down 1.5 per cent.

Wall Street reopened amid renewed volatility, with the Dow Jones falling 567 points at the open before a switchback ride saw it rise more than 500 points by the close.

In the UK, the spotlight will swing to tomorrow’s meeting of the Bank of England ratesetting monetary policy committee (MPC), which raised rates for the first time in a decade late last year.

Virtually no City economists believe the MPC will raise UK base rates again as early as tomorrow, but equity markets hope a more dovish statement on the timing of future upwards moves will steady nerves after a fraught period triggered by fears the Fed will raise rates in the near term given returning American strength.

Connor Campbell, financial analyst at Spreadex, said: “The only hope for the markets at the moment is that investors suddenly decide that the selloff 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, heartstopping drop.

“Admittedly the Bank of England could go some way to allaying investors’ fears of rising interest rates on Thursday, if [governor] Mark Carney issues a more dovish statement than forecast.”

David Madden, a market analyst with CMC Markets UK, said: “European stocks [are] ending the session in the red, as the global slide continues. Stocks quickly moved off the low of the session in early trading but are nowhere near the breakeven point for the day.

“Even though this major stock decline originated in the US, stocks on this side of the pond have been well and truly caught up in the chaos.”

Yesterday’s markets rollercoaster came after a Monday session that had seen Wall Street fall 4.6 per cent – its biggest percentage decline since August 2011 – the Footsie down 108 points at the close, Paris off 1.5 per cent and Frankfurt down 0.8 per cent.

James Hughes, a markets analyst with Axitrader, said: “It’s been another volatile day on global markets, with stocks initially falling lower and continuing the equity market rout of the last few days.”