London markets closed lower again on Tuesday as yet more strong data from the US added to the impression that interest rates will have to stay higher for longer.
The FTSE 100 fell 0.54 per cent to trade at 7,470.16 while the FTSE 250 fell 1.67 per cent to 17,677.76.
Markets have been hit by the growing conviction that interest rates will remain elevated for longer than markets expected.
This was reinforced in the US after Demand for workers rose unexpectedly in August, with the JOLTS survey showing 9.6m vacancies on the last business day of August. Economists had expected the number of job opening to fall to 8.8m.
Nancy Vanden Houten, lead US economist at Oxford Economics, said “job opening aren’t telling the story the Fed wants to hear”.
“Job openings in the JOLTS report surged in August, more than reversing the July decline. While the value of the JOLTS data has been called into question, the Fed continues to monitor it as a gauge the of labor market conditions and on the surface, it’s telling us that labor market conditions remain tight,” she said.
The data comes the day after US manufacturing activity improved slightly, hitting 49.0 in September from 47.6 in August. Although it was still in contraction, it was the highest reading since November 2022.
Markets interpreted the data as a sign that the US economy remains strong despite the Fed’s aggressive tightening, suggesting further rate hikes might be in the offing.
Susannah Streeter, head of money and markets, Hargreaves Lansdown: “The hangover from strong economic data out in the US is still being felt, with the headache increasing about the likelihood of high interest rates setting in rattling nerves.”
“A risk-off sentiment is growing, and the FTSE 100 is finding it hard to regain its mojo,” she continued.
Markets in Frankfurt and Paris closed down over one per cent while US markets were all sharply in the red.
The bond sell-off continued, with yields on US government debt rising to their highest level since 2007 while yields on 30-year gilts rose above their mini-budget levels.
Falling furthest on the FTSE was Ocado, which dropped 4.7 per cent.
The index was weighed down by falling commodities prices, with the prices of precious metals and oil dipping slightly. Resource giants Anglo American, Antofagasta and Glencore all dropped around three per cent.
Elsewhere fast fashion firm Boohoo said its revenue fell by 17 per cent and warned of further sales falls in the year ahead. Over the course of the year as a whole, its revenue could slip by between 12 and 17 per cent.
Its shares were down nearly just under two per cent having started the day as much as nine per cent lower.