Investors remain spooked by China slump as global markets stay in the red
EUROPEAN stock markets continued their worst run of trading for four years yesterday, as investors failed to take comfort in further stimulus measures from China’s central bank and signs the US Federal Reserve would delay a hike to interest rates.
Indices in Europe all closed in the red during a day of volatile swings which saw £30bn wiped off the FTSE 100. Britain’s benchmark index shed 100 points, down 1.7pc, as skittish investors took fright at the prospects of a slowdown in the Chinese economy. Germany’s Dax and France’s CAC40 both fell by 1pc.
Equities failed to rebound despite suggestions from New York Federal Reserve boss William Dudley that a September interest rate hike was no longer on the cards.
The decision to hike rates for the first time in nine years next month “seems less compelling to me than it was a few weeks ago”, said Mr Dudley, who has previously supported a September lift-off.
Mr Dudley said gyrations in the stock market would have to be “persistent” to “impinge” on policymakers’ outlook for global growth and hinted the Fed would still fire the starting gun on a rate hike by the end of 2015.
“The economy looks good and is on track to improve,” he added.
Unlike in Europe, US markets surged yesterday, snapping a six-session losing streak. The Dow Jones In- dustrial Average jumped 619.07 points, or 3.95pc, to 16,285.51, while the S&P 500 gained 72.90 points, or 3.9pc, to 1,940.51.
China’s authorities attempted to revive market fortunes yesterday by injecting another 140bn yuan (£14.12bn) into the country’s money markets, having cut interest rates earlier this week. The Shanghai Com- posite suffered another 1.27pc loss yesterday and has now seen 23pc of its value erased in just five days of trading.
“The picture still looks unclear, with bulls and bears finely balanced, but so long as markets can hold above the lows of the week then a recovery may still be in prospect,” said Chris Beauchamp at IG.