London’s FTSE 100 slipped on Friday morning after yet another fierce sell-off across US and Asian stocks, fuelled by concerns that global interest rates may rise faster than previously expected.
In early trading, the UK’s benchmark stock index fell by around 0.5 per cent having already suffered a more than 1 per cent fall on Thursday after the Bank of England held interest rates steady at its regular policy meeting but indicated that they may rise again soon.
That sent the pound sharply higher, which in turn weighed on equities. A vast proportion of FTSE 100 revenues are generated outside of the UK meaning that a strong pound tends to send the index lower.
Elsewhere, China’s main stock index fell by just over 4 per cent overnight after the US’s Dow Jones Industrial Average declined 4.1 per cent on Thursday and the S&P 500 lost 3.7 per cent. Earlier in the week the Dow was hit by a record 1,175-point loss triggered by better than expected US jobs data last Friday that sent US bond yields higher as it introduced the prospect of higher inflation.
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Nonetheless, despite the latest bout of selling, strategists and analysts maintained that this was unlikely to foreshadow a fundamental shift in the health of markets.
“The good news is that the fundamental outlook for the economy remains unchanged, and positive,” Mark Haefele, of UBS Wealth Management’s global chief investment officer, wrote in a note to clients on Friday morning.
He said that there had been “little evidence of contagion from equities to other asset classes, or to the real economy”.
“Rates, foreign exchange, and credit markets have all remained relatively calm, in spite of the multiyear high equity volatility,” he added.
In Europe, Germany’s DAX and France’s CAC clung onto slim gains. Moves in currency markets were muted too, with the pound broadly higher against a basket of other major currencies. Further afield Japan’s yen, generally considered a safe-haven currency during times of market turmoil, closed in on a four-month high against the dollar.
