Markets dive worldwide on fears of Chinese slowdown and US rate hike

MARKETS tumbled across the globe today on fears China is heading for a sharp slowdown and concerns about global growth.

Beijing could soon be back in lockdown after a rise in Covid-19 case numbers over the weekend prompted localised lockdowns and a ramp-up in testing.

That sent Chinese shares back to lows not seen since before the pandemic and sparked a global sell-off, as investors fretted about falling demand for goods and services from the world’s second biggest economy.

The oil price fell more than 5% to $101.28, a relief in itself but a sign of turmoil today. BP and Shell both fell more than 4% in London.

The FTSE 100 lost 172.65 points to 7349.03 — the biggest fallers being mining giants such as Glencore and RioTinto which sell huge amounts of commodities to China.

Elsewhere, warnings that Germany could fall into recession if there is an embargo of Russian energy also hit confidence.

Rabobank strategist Jane Foley said: “If there was a recession in Germany, that would drag the rest of Europe down and have knock-on effects for the rest of the world.”

In France, the CAC 40 opened down 2%, despite signs of relief at the victory of Emmanuel Macron in the French presidential election. Other European markets followed.

AJ Bell investment director Russ Mould said: “The markets have fallen out of bed in a big way on Monday. The prospect of further restrictions in China could lead to a poisonous mix of further inflationary pressure and weaker economic growth. The result could be stagflation — a slowing economy alongside surging prices — a brew few investors would be able to stomach.”

China’s CSI 300 index fell nearly 5% overnight, while Hong Kong’s Hang Seng lost 3.9%.

The pound fell sharply on Friday to its weakest in two years following bad retail sales figures.

It kept going today against the dollar, losing 0.96 cents to $1.2741.

The US Federal Reserve is now expected to put interest rates up sharply in a bid to combat inflation. That should make bonds more appealing at the expense of equities.

Candace Browning, head of global research at Bank of America, said: “Concerns around rates and recession are now the biggest risks for investors. Spiking food and gasoline prices plus the end of key stimulus programmes have investors concerned about the low-income consumer’s ability to spend.”