Top shares tumble £50bn in one day

NEARLY £50billion was wiped off the value of Britain’s leading companies yesterday as fresh worries about the global economy hit markets.

The FTSE 100 index of top shares fell 3.03 per cent (189.40 points) to close at 6058.54, with the £48.5billion loss dashing hopes the end of the summer break would restore calm.

It marked a dismal start to September for millions with money in blue chip stocks through pensions, share ISAs and other investments. In August, shares in London dropped 6.7 per cent – their biggest monthly fall for more than three years – amid fears China faces a sharp slowdown.

Chris Beauchamp, senior market analyst at City trading firm IG, said: ‘Global markets are in retreat again. It looks like the volatility of August is likely to remain with us.’

David Buik, market commentator at stockbroker Panmure Gordon, said the ‘stench of fear’ is hanging over the world’s financial centres.

On Wall Street, the Dow Jones fell 3 per cent yesterday to 16,058. Stock markets in Paris and Frankfurt were down more than per cent while there were heavy losses in Asia overnight. The latest sell-off came as bleak reports showed exporters in China and South Korea selling to the US and Europe are struggling.

STORM clouds are gathering over the global economy and growth will be even weaker than previously feared, according to the International Monetary Fund.

On another day of carnage on financial markets around the world, Christine Lagarde ( pictured) hinted that the Washingtonbased institution will be forced to cut its growth forecasts as soon as next month.

The comments from the IMF’s managing director came amid a flurry of disappointing figures from around the world – including in China, South Korea, the United States, Canada, Britain and the eurozone. The IMF trimmed its global growth forecast for this year from 3.5pc to 3.3pc in July but Lagarde suggested that now looked optimistic. The world economy grew by a subdued 3.4pc in 2014.

‘ We expect global growth to remain moderate and likely weaker than we anticipated last July,’ said Lagarde in a speech in Jakarta, Indonesia. ‘This reflects two forces – a weaker than expected recovery in advanced economies and a further slowdown in emerging economies especially in Latin America.

‘Asia as a region is still expected to lead global growth. But even here, the pace is turning out slower than expected, with the risk that it may slow even further given the recent spike in global risk aversion and financial market volatility.’

Lagarde urged other countries ‘to be vigilant to handle potential spillovers from China’s slowdown’.

She also said the prospect of higher interest rates in the US posed a threat to emerging economies such as Indonesia.

Her comments came as stock markets around the world tumbled following last month’s brutal selloff when worries about China, Greece and rising interest rates sparked panic among investors.

The FTSE 100, which fell 6.7pc in August in its worst month for more than three years, fell another 3.03pc or 189.40 points to 6058.54. The losses were echoed in Europe where Frankfurt, Paris, Milan and Madrid were all down more than 2pc. On Wall Street, the Dow Jones Industrial Average fell 2.84pc or 469.68 points to 16,058.35.

The rout in the West followed heavy losses in Asia overnight where the Nikkei fell 3.84pc in Tokyo and the Hang Seng was down 2.24pc in Hong Kong. The Shanghai Composite index – the main benchmark in China – was down another 1.23pc and has now lost nearly 40pc of its value since June.

Mike van Dulken, head of research at online trading firm Accendo Markets, said: ‘Equity markets are starting the new month in the red after yet more disappointing China manufacturing data increases concerns about slowing of world’s number two economy. Volatility around Europe suggests investor skittishness about China and global growth.’

The oil price also tumbled – with Brent crude dropping from $53 a barrel to $50.43 in London – having gained around a quarter in the previous five days. Oil hit a six-and-ahalf year low below $43 last week on worries about demand from China and beyond at a time of ample supply. A report published by the government in Beijing showed China’s giant manufacturing industry shrank in August in its worst month for three years. A rival report by independent research group Markit showed factory output in China at a six-and-a-half year low. Figures from Markit also showed the pace of manufacturing growth slowing in Britain and the US while in the eurozone an improvement in Germany was offset by a deepening slump in France.

Elsewhere, Canada slipped back into recession and South Korea saw exports crash nearly 15pc in August – the worst performance for six years – in a worrying sign for global trade.