A sea of red swept over European stock markets after central banks dampened hopes that interest rate hikes have come to an end.
On a bleak day of trading in London, the FTSE 100 fell 1.3 per cent, or 95.12 points, to 7360.55 and the FTSE 250 slid 1 per cent, or 184.76 points, to 17853.09.
The losses were mirrored in Europe where the main benchmark in Germany lost 0.8 per cent and France’s Cac 40 dropped 1 per cent. But Wall Street held firm as the Dow Jones Industrial Average, S&P 500 and Nasdaq all rose by around 1 per cent in early trading.
The latest bout of turmoil came after Federal Reserve chairman Jerome Powell on Thursday sought to pour cold water on hopes rates have peaked.
‘We know that ongoing progress toward our 2 per cent goal is not assured,’ he said.
Downward trend: The mood was not helped by the head of the European Central Bank, Christine Lagarde, who said it will not start cutting rates in the ‘next couple of quarters’
‘If it becomes appropriate to tighten policy further, we will not hesitate to do so.’
Russ Mould, investment director at AJ Bell, said: ‘Powell offered a reminder that inflation is still some way above 2 per cent and the central bank would act if appropriate to keep a lid on prices. As pushbacks go this was more of a mild shove than a body slam, but it was enough to temper some of the recent exuberance among investors.’
The mood was not helped by the head of the European Central Bank, Christine Lagarde, who said it will not start cutting rates in the ‘next couple of quarters’.
At the same time, official figures showed the UK economy stagnated over the summer.
Victoria Scholar, head of investment at Interactive Investor, said: ‘As elevated inflation and higher interest rates take their toll, there’s a growing risk of a shallow recession in the UK next year as the lagged impact of prior interest rate hikes begin to make their way through the economy. Bringing down inflation remains the Government and the Bank of England’s key priority, even as it comes at the expense of economic growth.’
Oil rose back above $80 a barrel after a sharp fall earlier in the week. That lifted BP 0.5 per cent, or 2.5p, to 477.85p and Shell by 0.6 per cent, or 14.5p, to 2629.5p.
On the corporate front, defence group Chemring said its results for the 12 months to the end of October should meet market expectations, including profit of £67m. It will invest around £30m into its Norwegian-based business, Nobel, which won more than £40m of orders in October amid strong demand for energetic materials and devices.
But Chemring also recorded one-off charges on its balance sheet following a strategic review of its US sensors business. Shares dipped 1 per cent, or 3p, to 2945p.
Defence company Babcock added 4.2 per cent, or 17p, to 419p signed a four-year contract worth £750m with the Ministry of Defence to provide the infrastructure required to support the maintenance of UK submarines.
Investors also scooped up shares in rival BAE ahead of the defence giant’s update on Monday.
The markets were unnerved by hundreds of anti-Israeli trade unionists who blocked the entrance of the company’s weapons factory in Kent. Shares rose 1.2 per cent, or 13.5p, to 1103.5p.
Molten Ventures, the venture capital firm which invests in tech businesses, said it expected the value of its portfolio to have fallen in the six months to the end of September due to the economic turmoil. Shares sank 7 per cent, or 18.8p, to 250.8p.
Indivior came under more pressure a day after the pharma firm swung to a loss and warned that revenue for Perseris, its injection that is used to treat adults with schizophrenia, should come in at the lower end of its forecasts. Shares, which fell 15 per cent on Thursday, dropped 6 per cent, or 83p, to 1293p.
