The FTSE 100 fell this morning as European stocks followed Asia’s lead and dropped amid global economic headwinds and fears of a US recession.
FTSE fell 0.5 per cent soon after opening, shedding 36 points, while the German Dax exchange opened down 0.4 per cent from its previous closing level despite later trimming its losses to become level after the release of a positive economic survey.
Paris's Euronext index also fell 0.4 per cent soon after opening, although it too rebounded after the news from Germany. The FTSE 100 also bounced somewhat, although less than its neighbours. It was down 0.1 per cent at 10.30 am.
The European index’s early performances followed a bad night for the Asian markets. Japan's benchmark Nikkei 225 index fell 3.1 per cent, while Hong Kong's Hang Seng index dipped 1.6 per cent and the Shanghai Composite fell one per cent.
The FTSE 100 fell two per cent during Friday trading, with the Dax index – which is made up of the 30 major companies on the Frankfurt Stock Exchange – registering a similar drop.
The falls come amid a global economic slowdown and after the US Federal Reserve’s dovish rates decision following worse-than-expected economic data. These factors sent the yield on 10-year US treasuries – government bonds – down to their lowest score in a year on Friday as investors fled to safe assets.
Chief market analyst at CMC Markets, Michael Hewson, said: “Having seen a decent recovery from the lows at the end of last year, global stocks appear to have run out of steam, if Friday’s sharp declines are anything to go by, and this morning’s activity in Asia and Europe have continued this negative theme.”
He said: “This year’s recovery was always predicated on the basis that of a combination of expectations of easier central bank policy as well as a benign outcome from US, China trade talks, and a rebound in economic data, would end up supporting valuations.”
US 10-year treasury yields also fell below three-month government bond rates for the first time in over a decade last week, inverting the so-called yield curve. Investors have traditionally taken this as a sign of impending recession.
“The gradual flattening of yield curves generally would appear to suggest that bond markets think the global recovery is starting to roll over,” Hewson said.