The City was ensnared by a global market sell off today driven by investors ditching stocks over fears soaring inflation will tip major economies into recession.
Britain’s biggest companies shed around £40bn today. London’s premier FTSE 100 index tumbled just under two per cent, taking its total losses for the year so far to nearly three per cent.
The UK-focused mid-cap FTSE 250 index plunged 1.31 per cent.
The world’s major stock markets have been in free fall recently as the outlook for the global economy sours.
Stagflation – when growth reverses amid rampant price rises – is becoming a very real risk for many of the world’s economic engines.
Wall Street on Wednesday posted its worst day since the US was in the teeth of the Covid-19 crisis, with the S&P 500 registering its biggest drop since June 2020, falling just over four per cent.
Major American retailers Target and Walmart warned consumers are starting to cut back due to inflation dealing a heavy blow to their spending power, intensifying investors’ jitters.
“Discretionary spending is being hit badly due to inflation already and companies are hurting from not being able to pass it all on,” Neil Wilson, chief market analyst at Markets.com, said.
Target’s shares fell around 25 per cent on Wednesday.
“This is the sort of shock you’d normally see with the likes of a big tech name, but staples are a much clearer bellwether for the real economy, “ Wilson added.
The tech-heavy Nasdaq also suffered brutal losses, shedding around four per cent. US stocks were mixed during the open today.
Stateside traders are worried soaring costs are eating into companies’ margins, clouding future earning prospects.
The US Federal Reserve is also expected to front load rate hikes to get on top of the highest rise in living costs across the pond in 40 years, weighing on equities. Chair Jerome Powell and co have already lifted rates 50 basis points for the first time since 2000.
Growth slowdown concerns extended into the Continent.
The pan-European Stoxx 600 closed 1.37 per cent lower yesterday and France’s Cac 40 lost 1.26 per cent.
The sell off spread to Asia in overnight trading. Japan’s Nikkei dropped 1.89 per cent, while Hong Kong’s Hang Seng index closed 2.54 per cent lower.