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The Guardian - UK
The Guardian - UK
Business
Claire Phipps, Graeme Wearden and Nick Fletcher

Australian and Asian stock markets slide after Dow suffers biggest one-day points fall – as it happened

A television screen on the floor of the New York Stock Exchange.
A television screen on the floor of the New York Stock Exchange. Photograph: Richard Drew/AP

We’re closing this live blog now but head over to our fresh one, where Graeme Wearden will once again steer you through the day’s ups and (probably more likely) downs:

You can find our full reports on the markets action here:

Thanks for reading and for contributions below the line.

Updated

Press Association reports that oil giant BP has reported annual profits of US$6.2bn (£4.4bn), up from US$2.6bn in 2016.

For readers just (re)joining us, the Tuesday morning briefing is a handy catch-up of the last few hours of markets action:

While you’re at it, if you like waking up to a snappy news digest, you could sign up to receive the briefing as an email every morning:

As Europe wakes up, here are some predictions for early action from IG:

In Australia, the ASX200 ended the day down 3.2%, with the All Ordinaries was down 3.23%.

That’s a loss of around A$60bn from the Australian share market.

Nikkei closes down 4.7%

After a day that saw it dip by 7.1%, Japan’s Nikkei 225 index bounced back a tad to finish on -4.7% at 21,610.24 points.

Stock markets across Europe are bracing themselves for huge falls after what was described as “carnage” in indexes across Asia overnight.

Falls in Japan and Australia were prompted by a plunging markets in the the US – with the Dow Jones on Monday experiencing its greatest one-day points fall in history.

The FTSE 100 was expected to fall nearly 4% on opening. That follows a 6% drop in Japan’s benchmark Nikkei 225 index and a 3.3% fall on Australia’s ASX200.

“There’s genuine carnage out there,” Chris Weston, chief market strategist at IG in Australia, told the Washington Post. “Everyone is just running for the hills because nobody actually knows what is causing this move.”

In Japan, the Nikkei’s decline of 1,071.84 points was its largest point fall since 2016.

Maki Sawada, from the investment research and investor services department at Nomura Securities Co, said stocks were being sold in panic after the Wall Street losses. “The sell-off accelerated in a chain reaction,” she told Kyodo News.

Other markets across Asia also suffered losses. South Korea’s Composite Stock Price Index fell by about 3% in morning trade. Hong Kong’s Hang Seng index plunged 4.9% while the Shanghai Composite index lost 2.2%.

Read the full report:

US president Donald Trump – always swift to claim the highs of the stock market for himself – has been so far quiet on Monday’s plunge.

But vice-president Mike Pence, on his way to South Korea for the opening of the Winter Olympics has told reporters that the Dow dip – the worst losses for six-and-a-half years – was “simply the ebb and flow of our stock market”.

The fundamentals of the US economy were, Pence said, “very strong” and the economy itself is “on the move”.

A quick round-up of the latest in the Asian markets doesn’t show much pick-up:

  • S&P mini futures down 3%.
  • MSCI index of Asia-Pacific shares outside Japan down 4.3%.
  • Nikkei down 6.8%.
  • Taiwan shares down 5.5%.
  • Hong Kong Hang Seng Index down 4.9%.

Federal MPs from both sides of the political divide have urged Australian investors not to panic after the share market suffered a A$50bn-plus sell-off, AAP reports:

Australian shares shed over 200 points or over 3.5% by late trading on Tuesday, more than doubling the sell-off of the previous day.

Treasurer Scott Morrison believed the big dive on the US stock market was a recalibration associated with recent economic data.

He told reporters in Canberra the market was reacting to last week’s US wage data and more bullish sentiment about what’s happening with inflation and its impact on bond markets:

Markets are volatile. When they recalibrate in relation to events like this, you do see a bit of these events happening. But people who watch these markets more and participate in them more closely than I do, I think, will see this for what it is and understand the forces behind it.”

Shadow treasurer Chris Bowen said self-funded retirees who relied on their share portfolios would obviously be concerned, but people understood that share markets go up and down:

That is the nature of the stock market. I’m sure people are keeping a close eye on it but I do think it’s important to keep it in that context.”

Share market volatility aside, Trade Minister Steven Ciobo said the Australian economy was behaving “exceptionally strongly”:

We are seeking really strong economic growth in Australia. We are seeing great employment creation.”

Reserve Bank governor Philip Lowe, following the central bank’s first board meeting of the year, said he expected economic growth to pick up to above three per cent over the next couple of years – a pace not seen consistently for a number of years.

Spot the difference:

The FTSE is set to open a huge 4.7% down according to online trading company IG. Thats big in anyone’s books.

That decline is the Nikkei’s biggest point drop since November 1990, Reuters has pointed out.

Japan’s afternoon trading session is not looking pretty: losses are now hovering around 7%.

A few moments ago the Nikkei 225 index was 21,078.71 points – a tumble of more than 1600 points since yesterday’s close.

There’s an hour left before close of trading at the Tokyo Stock Exchange, at which point we’ll have a better sense of the historical context of the falls.

Maki Sawada, from the investment research and investor services department at Nomura Securities Co, said stocks were being sold in panic after the Wall Street losses. She told Kyodo News: “The sell-off accelerated in a chain reaction.”

Meanwhile, bitcoin has dipped below US$6,200 for the first time in three months.

Six weeks after its record high of $19,511, bitcoin dropped to $6,190, with warnings it could plummet further.

Greg McKenna, chief market strategist at AxiTrader, told AFP:

The risk-off tone is hitting Bitcoin almost as hard as a global regulator and bank scrutiny. The latest dent to the Cryptospace has been banks saying they are shutting down the ability of clients to buy bitcoin with their cards.

This could end up a full round trip back into the $1,850/$2,966 region.

Consumer spending remains a concern for the Reserve Bank of Australia, which has again left the cash rate on hold at 1.5%.

At its first meeting of 2018 on Tuesday, the RBA board decided to leave the cash rate at the record low level it has now held for 18 months.

Governor Philip Lowe said business conditions were positive and increased public infrastructure spending was supporting the economy, but the outlook for household consumption remains uncertain.

Read the full report:

Asian markets summary

Associated Press reports:

Shares tumbled in Asia on Tuesday after a wild day for US markets that resulted in the biggest drop in the Dow Jones industrial average in six and a half years.

Japan’s Nikkei 225 index skidded 6.1% percent to 21,296.03 by early Tuesday afternoon. Hong Kong’s Hang Seng index lost 4.9% to 30,651.31 and Australia’s benchmark S&P ASX 200 had skidded 3.3% to 5,828.40.

South Korea’s Kospi declined 2.9% to 2,418.70 and the Shanghai Composite index was off 2.2% at 3,412.55.

All other regional markets were lower.

The losses in Asia tracked the Dow’s 1,175 point plunge on Monday, its worst point drop of all time and its worst percentage decline since August 2011.

“There would be few places to hide from the risk-off atmosphere that is expected to extend its stay in Asian markets today in a significant manner,” Jingyi Pan of IG said in a commentary. “This is fear rolling over itself.”

Panic in other markets can send investors racing for the “safe haven” of Japanese yen holdings, she noted. That is painful for Japanese and other regional export manufacturers, whose competitiveness is hurt by stronger currencies that push their prices relatively higher.

The U.S. dollar weakened against the Japanese yen early Tuesday, trading at 108.61 yen, down from 109.12 on Monday.

Australian shares shed four months of gains in just morning trading, with all sectors losing ground.

Watching the market trading boards at the Australian Securities Exchange (ASX) in Sydney on Tuesday.
Watching the market trading boards at the Australian Securities Exchange (ASX) in Sydney on Tuesday. Photograph: David Moir/AAP

With afternoon trading under way in Japan, the losses on the benchmark Nikkei 225 index have now passed 6%.

A few moments ago the index was at 21,243.15 points, a decline of 1438.93 points (6.34%) since yesterday’s close.

Here’s AAP’s take on that RBA decision:

The Reserve Bank of Australia has left the cash rate unchanged at 1.5%, citing continuing concerns about weak household consumption.

Following its first meeting of 2018, the RBA board left its official interest rate at the record low level it has now held for 16 months.

The central bank said in a statement accompanying the February decision that while business conditions and investment were improving, household consumption remains “a continuing source of uncertainty”.

The Australian dollar, already losing ground after worse than expected retail and international trade data, fell following the RBA’s decision and was at 78.61 US cents at 1437 AEDT, from 78.73 US cents ahead of the announcement.

The statement from the RBA explains:

The low level of interest rates is continuing to support the Australian economy. Further progress in reducing unemployment and having inflation return to target is expected, although this progress is likely to be gradual.

Taking account of the available information, the Board judged that holding the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time.

Reserve Bank of Australia keeps interest rate at 1.5%

The cash rate will remain unchanged at 1.5%, according to a statement from the RBA’s governor, Philip Lowe.

Japan mid-session summary

Markets in Japan have taken a hit in morning trade after the steep plunge in the US Dow Jones industrial average in the United States.

By the close of morning trade on Tuesday, Japan’s benchmark Nikkei 225 index had fallen 5.26% to 21,487.87 points, its lowest level since October. It had fallen by as much as 5.64% about 11am local time before recovering slightly.

Trading will soon resume for the afternoon session. If the Nikkei 225 finishes the day around the same level, according to a Kyodo News report:

It would be the largest single-day drop since it plunged over 1,286 points in June 2016.”

Hiroshige Seko, the economy minister, vowed to “closely monitor the market”. But in an attempt to ease the local jitters, he said:

Corporate profits are at record-high levels, and the Japanese economy’s trend is nothing to be pessimistic about.”

Kyodo News interviewed a tax accountant, 49, who, while watching a stock price display in Tokyo, didn’t seem to be singing from the same song sheet as the minister:

It reminds me of what happened at the time of the Lehman shock. I hope prices will stop falling soon.”

TOPIX, a broader index that accounts for all first-section issues on the Tokyo Stock Exchange, declined 4.99% in morning trade. According to a TOPIX breakdown, the biggest losses were in the glass and ceramics sector (down 7.13%), nonferrous metals (down 6.54%), insurance (down 6.45%), and metal products (down 6.35%).

The mid-session report from CommSec warns this is the worst day for Australian equities in almost two years:

The Australian market is slumping by almost 3% at lunch; the worst day for local equities in 20 months following a massive tumble for US shares overnight, which takes the ASX 200 to a three-and-a-half month low …

Locally, all sectors are coming under substantial pressure with all stocks on the ASX 200 index (with the exception of gold stocks) slumping. Energy stocks are the worst performers, dropping by 4%, with Woodside (WPL) and Santos (STO) leading the falls.

Tech stocks, retailers and healthcare are down by ~3%.

CommSec expects the RBA to keep interest rates at their current level; the announcement is expected within the next half an hour:

The Reserve Bank (RBA) will almost certainly keep rates on hold this afternoon at 2.30pm AEDT. Economists will be paying close attention to the accompanying one-page statement by the central bank and comments about the Aussie dollar and wages growth.

The Hang Seng China Enterprises Index of Hong Kong-listed Chinese firms is down by 5.15%:

2am GMT state of the markets

Here’s how things stood globally at 2am GMT:

Tokyo Nikkei 225: DOWN 5.1% at 21,529.19

Hong Kong Hang Seng: DOWN 3.2% at 31,225.11

Shanghai Composite: DOWN 2.1% at 3,415.86

Euro/dollar DOWN at $1.2384 from $1.2373 at 2200 GMT

Pound/dollar DOWN at $1.3972 from $1.3958

Dollar/yen DOWN at 109.08 yen from 109.13 yen

Oil West Texas Intermediate: DOWN 56 cents at $63.59 per barrel

Oil Brent North Sea: DOWN 58 cents at $67.04 per barrel

New York DOW: DOWN 4.6% at 24,345.75 (close)

New York S&P 500: DOWN 4.1% at 2,648.94 (close)

London FTSE 100: DOWN 1.5% at 7,334.98 (close)

Updated

US S&P 500 futures, the world’s most liquid, tumbled 2.5% to four-month lows in Asian trade on Tuesday as the sell-off triggered by worries about inflation showed no sign of abating, Reuters reports.

They fell to as low as 2,542, the weakest levels since early October, and 11.7% below their record peak of 2,878.5 touched on 29 January.

David Bassanese, chief economist at BetaShares Capital, tells us:

The first thing is that the market was severely overbought coming into February, so the markets were looking for an excuse to sell off. The payrolls number on Friday provided a powerful reason to do so.

What was a surprise was the speed of the selloff on Friday and Monday. It was pretty sizeable. But I still think it’s more of a correction than an end of the bull market, although the Dow Jones is off quite a bit already.

The key thing is the US wages number. The markets will be nervous waiting for the next payroll at the start of next month. If it goes up, get very worried. But in the last few years every time wages have spiked they’ve fallen back again.

Updated

Amid the global market jitters, Japan’s Nikkei 225 index has now lost more than 5% in morning trading. At last check it has fallen 1,201.61 points to 21,480.47 points (-5.3%).

Updated

China and Hong Kong stocks have taken a tumble on opening. There was a drop of 2% for both the CSI300 index and the Shanghai Composite Index, while the Hang Seng saw a 3.8% dip.

Neatly encapsulated by Bloomberg here:

And here we go:

China’s markets are the next to open:

Paul Dales, chief Australia and New Zealand economist at Capital Economics, tells us:

The selloff seems due to reconsideration by the markets of how rapidly rates might rise this year. And that seems to have been triggered by data figures showing a rise in US wage growth on Friday.

The most important question is will it continue? We expected wage increases to pick in the US and for the Fed to pick up the number of rate rises this year. So on that basis it will be sustained.

That said, we feel the equities market will be underpinned by reasonably strong growth this year in the world economy. So it’s hard to see equities fall sharply. They might finish the year lower than they started but they won’t fall sharply because of the expected growth in the global economy.

In the midst of a very turbulent day, Guardian Australia cartoonist First Dog on the Moon has this helpful offering: the last thing you ever need to read about blockchain. Probably.

Australia has slipped to a trade deficit of A$1.36bn (US$1bn) in December, from a revised A$36m surplus in November, AAP reports.

Exports were up 2% for the month while imports were 6% higher, the Australian Bureau of Statistics said.

The Australian dollar has fallen from 78.85 US cents ahead of the data release to 78.67 US cents.

The latest from Tokyo:

The Nikkei 225 index is continuing to dive deeper. It’s now lost nearly 1,100 points in early trade. The latest figures (at 9.45am Tokyo time) show a drop of 4.83% to 21,586.31 points.

Masahiro Ichikawa, a senior strategist at Sumitomo Mitsui Asset Management Co, told the Kyodo news agency: “We expect the Nikkei will face resistance at 21,500.”

Ichikawa added that investors would also keep an eye on the yen’s movement against the US dollar. The market would be further weighed down if the US dollar dropped below the 109 yen line, Ichikawa told Kyodo.

Ric Spooner, chief market analyst at CMC Markets, has thoughts on the Australian market response ahead of the announcement by the Reserve Bank of Australia (RBA) at 2.30 pm AEDT (3.30am GMT):

The local stock market will open sharply lower this morning but could outperform US markets if the current sell-off extends over coming weeks. At 15.9, the blended forward PE on the ASX 200 is above the 2013-17 average of 15.2. However, at 2.83% the 10-year bond yield is still below the 3.05% average that applied during that period.

The upcoming profit-reporting season could also help the local market fall less than the US if the current sell-off extends.

Oil fell last night while base metals were slightly firmer. This indicates that pressure on oil markets is largely about concerns over increasing shale oil supply rather than a general risk off move in commodities.

The Aussie dollar, on the other hand has been a risk off casualty, falling heavily against major currencies. The market impact of major data releases today including retail sales, balance of trade and the RBA statement could be important in that context. Markets would be encouraged if retail sales data can provide further comfort that consumption has continued to recover from its late winter/early spring funk.

After half an hour of trading in Japan, the benchmark Nikkei 225 index has dropped 4.28% to 21,710.20. That’s a fall of 971.88 points. And it doesn’t appear we’ve seen the bottom yet.

Mining stocks are down 4.45%, oil and coal down 4.58%, and insurance stocks are down 5.44%, according to a breakdown of sectors in Japan’s TOPIX index.

Dow's 10 biggest points declines

Associated Press has some useful context for the day’s “biggest ever points drop”:

The Dow’s plunge was the biggest ever in terms of points, but on a percentage basis, it was only its 100th worst single day drop, according to S&P Dow Jones Indices. It had a larger percentage drop as recently as August 2011.

The Dow’s steepest percentage decline was on Black Monday on 19 October 1987, when it fell 22.6%.

The 10 largest point declines

5 February 2018:

  • Close 24,345.75
  • Decline in points -1,175.21
  • Decline in % -4.6

29 September 2008:

  • Close 10,365.45
  • Decline in points -777.68
  • Decline in % -7

15 October 2008:

  • Close 8,577.91
  • Decline in points -733.08
  • Decline in % -7.9

17 September 2001:

  • Close 8,920.70
  • Decline in points -684.81
  • Decline in % -7.1

1 December 2008:

  • Close 8,149.09
  • Decline in points -679.95
  • Decline in % -7.7

9 October 2008:

  • Close 8,579.19
  • Decline in points -678.92
  • Decline in % -7.3

2 February 2018:

  • Close 25,520.96
  • Decline in points -665.75
  • Decline in % -2.5

8 August 2011:

  • Close 10,809.85
  • Decline in points -634.76
  • Decline in % -5.6

14 April 2000:

  • Close 10,305.78
  • Decline in points -617.78
  • Decline in % -5.7

24 June 2016:

  • Close 17,400.75
  • Decline in points -610.32
  • Decline in % -3.4

Updated

Back in Australia, the market lost A$52bn (US$41bn/£29bn) in its first four minutes of trading this morning – that’s a drop of 2.7%. Monday had already seen a loss of A$30bn.

Japan’s Nikkei share average has fallen to its lowest level since late October 2017, Reuters confirms.

My colleague Daniel Hurst reports from Tokyo:

The Nikkei Index 400 is down 3.81% in early trade in Japan, while the Nikkei mid and small cap index has plunged 4.41%.

Japanese stock market opens down

Stock markets in Japan and South Korea have just opened with an immediate drop, as expected.

Within minutes, the Nikkei 225 index was down by more than 3.3%.

This is Claire Phipps picking up the live blog while Graeme Wearden grabs some sleep. We’ll be sticking with the Asian and Australian markets news right here.

Updated

Bloomberg have calculated that Monday’s Wall Street rout wiped $1.25 trillion off the US stock market.

That wipes out all the gains recorded in early 2018, when Donald Trump’s tax cuts sparked a rally.

Australian market falls 2.7% in early trading

The Australian stock market has tumbled on opening and investors are bracing for more big losses on Tuesday in the wake of a chaotic day of trading on Wall Street.

The ASX was down 2.71% or 163 points early Tuesday, the worst fall, so far, since June 2016.
Before the market opened futures were down 139 points, and the Australian dollar slipped below the US79¢ mark. It comes in the wake of a wild day on Wall Street in which the Dow ended up down 1,175 points, a slump of 4.6% - which is the US stock market’s worst day in more than six years - and a day after Australian markets fell 1.55%.
CommSec chief executive Craig James said the market “correction” had further to go. “We’ve got to remember these US markets were at all time highs, record highs, he said, adding:

“This is an orderly correction [to] more normal levels, fairer markets.

The concern is that the US economy is doing too well and that could mean higher interest rates. Share markets have gone too far and need to correct to normal levels.”

Earlier the Treasurer Scott Morrison tried to calm nerves about the fall, describing it as a recalibration.
“Markets are volatile - when they recalibrate in relation to events like this you do see a bit of these events happening,” he said.

“But people who watch these markets more and participate in them more closely than I do, I think, will see this for what it is and understand the forces behind it.”

Last Friday, the latest US jobs report sparked worries over the prospects for inflation and a surge in bond yields, as well as concerns the Federal Reserve will raise rates at a faster pace than expected.

Updated

Newsflash: Australia’s stock market has fallen by 2.7% at the start of trading.

The reverberations from Wall Street’s slide are rippling through global markets.

More to follow...

CNBC’s Matthew Taylor warns of a rough start to trading in Australia...

Updated

Stock market traders in Japan should prepare for a very turbulent day....

Asian Markets to Open Lower

Markets in Asia are set to open lower on Tuesday, with Nikkei futures down more than 3% after the U.S. stock market rout, says Marketwatch.

Updated

Some experts are blaming computerised trading systems for fuelling today’s losses.

Certainly, there was something unnerving about the way the Dow Jones industrial average plummeted to a 1,500 point loss in the final hour of trading, shedding 700 points in just six minutes.

The Dow’s record-breaking points plunge
The Dow’s record-breaking points plunge Photograph: Thomson Reuters

Could algorithmic trading strategies have caused it, by firing out fresh sell orders every time the Dow slipped lower?

Steve Wachtel, portfolio manager of SSI Investment Management, told Reuters:

“[It was a] Sharper sell-off than we expected but it’s technical based with mostly the machines selling. Seemed like there was a minor flash crash there around noon.

We look at the credit markets closely when there is a large equity sell-off and the credit markets are still very healthy, just moderate spread widening today.”

Craig Erlam of City firm OANDA also blames computer-based trading.

A brief flash crash on Monday afternoon saw the Dow shed more than 1,500 points, a large chunk of which occurred in a very short period of time.

Naturally there is a lot of questions being asked about the role of automated trading in the collapse and I’m sure the discussion will happen over the coming days but the important thing is that markets recovered from the initial shock.

Here are a few photos from Wall Street’s brutal and dramatic day:

A television screen on the floor of the New York Stock Exchange.
A television screen on the floor of the New York Stock Exchange. Photograph: Richard Drew/AP
Specialists John Parisi, left, and Michael Gagliano working on the floor of the New York Stock Exchange.
Specialists John Parisi, left, and Michael Gagliano working on the floor of the New York Stock Exchange. Photograph: Richard Drew/AP
A trader works on the floor at the closing bell of the Dow Industrial Average at the New York Stock Exchange on February 5, 2018 in New York. Wall Street stocks endured a brutal session Monday, with the Dow seeing one of its steepest ever one-day point drops, as the heady bullishness of early 2018 gave way to extreme volatility. / AFP PHOTO / Bryan R. SmithBRYAN R. SMITH/AFP/Getty Images
At the closing bell.... Photograph: Bryan R. Smith/AFP/Getty Images
Personal sweeping the floor after the closing bell.
Personal sweeping the floor after the closing bell. Photograph: Bryan R. Smith/AFP/Getty Images

Although the Dow gets a lot of attention (especially when it plunges over 1,000 points), we should remember it only contains 30 companies.

They’re mostly big household names - like Boeing (-5.7% today), Pfizer (-5.3%), Coca-Cola (-3.9%), Intel (-3.5%) and Apple (the best performer, down only 2.5%).

The S&P 500 is a broader measure. And it also had a rough day, down over 4% in its biggest selloff since August 2011.

Reuters has more details:

The benchmark S&P 500 and the Dow suffered their biggest percentage drops since August 2011 as a long-awaited pullback from record highs deepened.

The financial, healthcare and industrial sectors fell the most, but declines were spread broadly as all major 11 S&P groups dropped at least 1.7 percent.

All 30 of the blue-chip Dow industrial components finished negative.

With Monday’s declines, the S&P 500 erased its gains for 2018 and is now down 0.9 percent in 2018.

Here’s how the US, Canada, Mexico and Brazilian stock markets ended on Monday evening:

The major American markets

Full story: Dow's worst day since 2011

Here’s my colleagues Philip Inman and Ed Helmore on today’s drama:

US stocks took a further steep plunge on Monday, with the Dow Jones industrial average dropping 1,179 points, the largest one-day points fall on record and erasing all the gains made so far this year.

The drop came after another bad day on global markets as investors reacted to global equity losses overnight and concern that central banks will increase interest rates in response to inflationary pressures from surging global economies.

The Dow dropped 1,600 points in one instance before bouncing back. The index is now off more than 1,800 points over two days of trading.

“This was volatility unleashed,” said Jack Ablin, chief investment officer at at Cresset Wealth. “It’s partially fear of interest rates, partially this new Fed chairman Jerome Powell, partially the market is overvalued relative to fundamentals.”

If the falls continue they could prove problematic for president Donald Trump who has consistently touted record high stock markets as proof that his presidency is boosting the economy.

Jerome H. Powell taking the oath as Chairman of the Board of Governors of the Federal Reserve System today
Jerome H. Powell taking the oath as Chairman of the Board of Governors of the Federal Reserve System today Photograph: Jim Lo Scalzo/EPA

A new job is always a learning curve. But spare a thought for Jerome Powell, America’s new top central banker.

Powell formally took over from Janet Yellen as head of the Federal Reserve today, and straight into a day of market mayhem.

One factor driving the sell-off, it seems, is concern that the Fed may be more hawkish than expected under Powell - and raise interest rates aggressively. The latest US jobs data, released last Friday, showed a big jump in wage growth - which could push inflation higher.

Britain’s FTSE 100 began the week by shedding 108 points or 1.5% to a two-month low of 7334 points.

City firm IG is currently predicting that it could fall by over 250 points when trading resumes on Tuesday.

I must repeat that these futures markets can change significantly overnight - but it shows that Tuesday could be another dramatic day in the markets....

Naeem Aslam of Think Markets predicts further losses in the days ahead, given the ferocity of today’s sell-off.

By looking at the market reaction today, one thing is for certain that we are in for a rough ride and Trump can’t blame this one on Obama.

I have a strong feeling that this sell off is going to intensify because bears are seeing blood on the street.

Asia-Pacific markets are likely to suffer fresh losses when they open for Tuesday’s sessions.

The news that Wall Street has suffered its worst day in six years will surely spook investors.

The Japanese Nikkei is currently being called sharply lower - but that could change by the time trading begins in a couple of hours.

Here’s a flavour of Bloomberg’s take on the market rout:

U.S. stocks plunged the most in 6 1/2 years, with the Dow Jones Industrial Average sinking more than 1,100 points, as the equity selloff reached a fever pitch amid rising concern that inflation will force interest rates higher. Treasuries rallied and gold rose on haven demand.

Volatility roared back into American equity markets, as the S&P 500 Index sank 4.1 percent to wipe out its January gain and turn lower on the year. The index capped its worst day since the U.S. lost its pristine credit rating, topping the rout that followed China’s shock devaluation of the yuan, the Brexit selloff and jitters heading into the presidential election. Trading volume was almost double the 30-day average. All but two stocks in the broad gauge declined.

“This is classic risk off that may not end any time soon,” says Win Thin, head of emerging-market currency strategy at Brown Brothers Harriman.

Financial blogger Josh Brown has put today’s rout into historical context...

Dow suffers biggest points fall ever

Today’s sell-off is truly historic, in one sense.

The Dow has never, ever, suffered a 1,500 plunge during a single trading session before.

And it has never before posted a quadruple-digit fall on a single day.

Monday’s wild selloff has firmly beaten the previous biggest points fall, of 777 points - set during the 2008 financial crisis.

We shouldn’t get too carried away, though; in percentage terms, today’s selloff is less dramatic - but still the worst in six years.

The Washington Post sums up today’s wild trading thus:

The Dow Jones industrial average plunged a heart-stopping 1,500 points in afternoon trading on Monday before gaining back some ground — and finishing at 24,342, or down 4.6 percent — as volatility returned to the stock market with a vengeance after a year of rare tranquility.

The Dow has swung more than 2,100 points in the last two sessions, a decline pushing more than 8 percent and shattering long-term momentum.

DOW CLOSES DOWN OVER 1,100 POINTS

Boom! The Dow Jones industrial average has suffered its worst day in over six years.

After a wild trading session, the Dow has ended down 1,175 points at 24,345 points.

That’s a slump of 4.6% - which is the US stock market’s worst day in over six years.

There were also heavy losses on the S&P 500 and Nasdaq indices, which both lost around 4% (updated).

Updated

Australia braces for losses

Investors in Australia are bracing for another volatile day when their markets open in a few hours.

The futures market suggests there could be some sharp losses. The benchmark Australian index, the S&P/ASX200, is being called down 88 points, or almost 1.5%

That follows Monday’s losses, as Australian Associated Press explains:

The Australian market on Monday lost around $33 billion after a sharp fall in US markets last Friday sent local investors running for the exits.

The benchmark S&P/ASX200 index fell 95.2 points, or 1.56 per cent, to 6,026.2 points while the broader All Ordinaries index tumbled 101.4 points, or 1.63 per cent, to 6,128.4 points. ...

Locally, in economic news on Tuesday, the Reserve Bank of Australia holds its monthly board meeting and announces its interest rate decision.

The Australian Bureau of Statistics releases December retail trade figures, plus international trade in goods and services data, also for December.

Updated

CNBC is calling today’s sell-off ‘whipsaw trading’.

With 10 minutes to go, the Dow is deep, deep, deep in the red, down over 1,000 points or 4%.

Wall Street’s fear index is surging.

The VIX index, which tracks volatility, has more than doubled to 35.7, its highest level since August 2015.

Manufacturing group 3M is the biggest faller on the Dow right now, down 5.5%

Oil firms Exxon and Chevron are close behind.

Updated

Reuters: Wall Street plunges, Dow erases 2018's gains

If you’re just tuning in, here’s Reuters’ latest market report:

U.S. stocks sold off sharply on Monday, with the Dow industrials falling back below 25,000, as a pullback from record highs deepened and investors grappled with rising bond yields and potentially firming inflation.

All three major U.S. indexes fell more than 1 percent while the Dow and S&P 500 dropped more than 2 percent.

Late in the session, the Dow is down more than 1,000 points.

The energy, financials and healthcare sectors fell the most, but declines were spread broadly as all major 11 S&P groups dropped.

During Monday’s session, the benchmark S&P 500’s fall on Monday put its pullback from its Jan 26 record high at more than 6 percent.

Friday’s jobs report sparked worries over the prospects for inflation and a surge in bond yields, as well as concerns the Federal Reserve will raise rates at a faster pace than expected.

Benchmark 10-year note yields pulled back after
surging to 2.885 percent overnight, the highest since January.

Mona Mahajan, U.S. investment strategist with Allianz Global Investors in New York says:

“When you have rates moving upwards, typically what happens is that financial conditions tighten, things like bank lending, mortgage lending start to slow and then the economy is at risk of a potential downturn.”

Updated

This is an astonishing selloff. Shares are going through the floor on Wall Street.

The Dow just extended its losses to 1,500 points - a fall of over 6% today.

Wall Street today
Wall Street today Photograph: Bloomberg TV

Christopher Vecchio of Daily FX suspects that the political tensions in Washington are contributing to the declines.

DOW DOWN 1000 POINTS

ALERT: The Dow just plunged by 1,000 points, or almost 4%, wiping out all this year’s gains.

The US stock markest today
The US stock markets right now Photograph: Thomson Reuters

Update: The Dow just lost 800 points, or 3%, as this trading session turns increasingly wild.

DOW DOWN 700 POINTS

Traders on the floor of the New York Stock Exchange today.
Traders on the floor of the New York Stock Exchange today. Photograph: Jason Szenes/EPA

Today’s sell-off is actually threatening to exceed Friday’s slide.

Worries over looming US interest rates, and the recent losses in the government bond market, are hitting shares harder in New York.

Another wave of heavy selling has swept the Dow down by over 760 points - on top of Friday’s 665.75 drop. That takes the index firmly under the 25,000 mark, at 24758

With one hour’s trading to go, can investors pull it back? If not, it’s going to be another day of chunky losses on Wall Street....

Bitcoin takes another hammering

Digital currencies are also being hit hard today.

Bitcoin has slumped by 18% to $6703 -- a fall of almost $1,500. December’s record high of almost $20,000 feels a long way away.

The sell off comes after Britain’s Lloyds Bank said it wouldn’t let customers buy digital currencies on their credit card - for fear of being left with hefty losses.

With regulators in the UK, the US, China and South Korea all probing bitcoin, Miles Eakers of foreign exchange firm Centtrip predicts it will soon hit $5,000.

Reuters’ Jamie McGeever has spotted something...

I guess the president has been busy with one thing or another...

The S&P 500, which is a broader (and arguably better) measure of the US stock market, is also falling again.

It’s down 1.6% at 2,717.48 points, a drop of 44 points.

As things stand, the Dow has lost more than 1,000 points over the last two trading sessions.

Once upon a time, that would have been a proper slump. But it’s actually only a 4% drop - thanks to the surge in stock prices over the last year.

This is turning into a very skittish session on Wall Street.

With 90 minutes trading to go, the Dow is now down 535 points, or over 2%.

That takes it down to the 25,000 point mark - which it had smashed through for the first time at the start of January.

Wall Street is solidly in the red again, with the Dow down almost 500 points (1.8%).

Wall Street at 1.30pm EST
Wall Street at 1.30pm EST Photograph: Bloomberg TV

A trader works on the floor of the New York Stock Exchange.
There are some worried faces on the floor of the New York Stock Exchange today. Photograph: Brendan Mcdermid/Reuters

Back on Wall Street, the sell off is speeding up.

European shares end sharply lower

The global share sell-off from Friday has continued at the start of the new trading week, with European markets falling back and Wall Street going through a volatile start to the day.

Amid signs of a stronger global economy, investors are worried that central banks might raise interest rates and stop the flow of cheap money more precipitously than previously expected. Stronger than expected US non-manufacturing data only added to the idea that a March rate hike is on the cards from the Federal Reserve, with up to another three to follow.

European markets were also playing a bit of catch-up - or catch-down - since the bulk of Friday’s falls on the Dow came after European traders had packed up for the weekend. So the final scores in Europe showed:

  • The FTSE 100 finished 108.45 points or 1.46% lower at 7334.98
  • Germany’s Dax dropped 0.76% to 12,687.49
  • France’s Cac closed 1.48% down at 5285.83
  • Italy’s FTSE MIB fell 1.64% to 22,821.63
  • Spain’s Ibex ended off 1.44% at 10,064.5
  • In Greece, the Athens market lost 2.48% to 853.67

On Wall Street, the Dow Jones Industrial Average is currently down 370 points.

On that note, we’ll close for the day and be back tomorrow, barring any major developments before then. Thanks for reading and for all your comments.

In fact Wall Street is now on the slide once more, with the Dow Jones Industrial Average down more than 300 points, in a marked sign of the current volatility.

The Dow has fluctuated between a high of 25,520 at the open and a low of 25,165.

Updated

FTSE 100 suffers biggest one day fall since snap election called

Wall Street may be recovering, somewhat, but European markets remain under pressure.

The FTSE 100 has dropped 1.46%, the biggest one day percentage fall since Theresa May called her snap general election on 18 April last year.

This is the fifth consecutive day of losses for the UK’s leading index, and leaves it at its lowest level for around two months.

FTSE 100 falls

Updated

The current stock market falls are a blip and not the start of a slide, according to Charles Stanley. Chief investment officer Jon Cunliffe said:

Today’s equity market wobbles belie positive corporate earnings and we think today’s falls should be regarded as a buying opportunity. The fourth-quarter earnings season painted a bright picture of good earnings deliver from companies across the globe. The positive relationship between a stronger global economic growth and revenues, with corporate earnings supported by improving pricing power supports margins. Today’s ‘sell-off’ does not change this and we expect strong earnings growth to continue, with central banks being careful not to upset the apple-cart.

On Wall Street, the Dow Jones Industrial Average is down around 70 points - not the day’s best but by no means the worst either. European markets, however, are showing little sign of improvement. David Madden, market analyst at CMC Markets, said:

European markets are firmly in the red as the global sell-off in stocks has taken hold. Ever since the US posted strong average earnings last Friday, traders have been rattled by the prospect of tighter monetary policy around the world. Economic indicators in the US, Europe and Asia point for a need to tighten up monetary policies from various central banks. Equity traders were enjoying a bullish run recently, and the jolt from the major decline in the US last Friday has triggered a worldwide round of profit taking.

[In the US] traders are getting used to the idea that US interest rates could be hiked four times this year. Last Friday acted as a remained that stock markets don’t go up in a straight line forever, and now we are seeing some short covering and bargain hunting.

Chris Beauchamp, IG’s chief market analyst, said:

Signs of a recovery are in evidence on Wall Street, as the dust settles from what was one of the most volatile weeks in recent memory. Humans being what they are, the sudden downdraft seemed much worse than it was, especially compared with the volatility of 2015, but in reality it marks a return to a more normal market. Only time will tell whether we are about to see a resumption of the rally, or a bigger selloff. From current activity, it looks like calm has returned, with steady dip buying been seen on both sides of the Atlantic. It will take more than a few days of chaos to disrupt this bull market. Earnings season continues to provide the good news investors want to see, and while central bank tightening remains a worry, there is little sign that the Fed is in any hurry to quicken the pace.

Draghi also warned:

New headwinds have arisen from the recent volatility in the exchange rate, whose implications for the medium-term outlook for price stability require close monitoring.

Updated

The eurozone economy is growing more strongly than expected, European Central Bank president Mario Draghi, is telling the European parliament.

But despite being more confident about the path of inflation, the bank still needs to be patient about monetary policy, he says.

In his opening remarks, Draghi said:

While we can be more confident about the path of inflation, patience and persistence with regard to monetary policy is still warranted for underlying inflation pressures to build up and inflation to converge durably towards our objective.

The recovery in US markets has done little to help their European counterparts, which are still nursing losses of around 1% (German’s Dax excepted). Connor Campbell, financial analyst at Spreadex, said:

Though the Dow Jones avoided the precipitous plunge promised by the index’s futures, that ended up meaning very little to the European indices.

Given that at one point the index was nearing 25100, the fact that it is flat around the 25500 mark is something of a coup for the Dow Jones. A stellar ISM services PMI likely helped, with the figure coming in far higher than forecast at 59.9, against the 56.5 expected and the 55.9 seen in December.

The dollar, meanwhile, got revenge on the pound for its last few months of misery. Cable dropped 0.9%, informed not only by the new wave of hawkishness to hit the markets and that strong ISM non-manufacturing PMI, but the UK’s own 17 month low-striking services reading and the Tories’ latest round of Brexit in-fighting. Sterling also struggled against the euro, falling 0.6% to €1.128, its worst price against the single currency in 2 and a half weeks.

Unusually the FTSE could find no joy in the pound’s problems. The UK index was too busy dealing with the market-wide fear that a further rise in interest rates is on its way, sliding 1.1% as the day went on. The Eurozone indices, meanwhile, were a mixed bag. The DAX managed to reduce its losses to just 0.4%, following the Dow’s lead, but with the French CAC and Spanish IBEX down 1.1% and 1.2% respectively.

Wall Street recovers

Quite some turnaround on US markets.

The Dow Jones Industrial Average is now down less than 100 points and the S&P 500 and Nasdaq Composite are in positive territory, helped by a rebound in technology stocks. Intel, for example, is higher on reports that Apple could use its chips in the next generation iPhone.

The latest ISM surveys point to 3% growth in the US this year, as well as making a March rate hike likely barring unforeseen circumstances, says economist James Knightley at ING Bank:

Both the non-manufacturing and the manufacturing ISMs are at incredibly strong levels, backing our call of 3% GDP growth in 2018.

The US ISM non-manufacturing index has risen from a reading of 56.0 in December to 59.9 for January, suggesting the bad weather at the beginning of the month has failed to dent the US economy’s momentum. In fact the headline index is at a twelve year high with the sub-components looking incredibly strong - employment is at its best ever level in the series’ near 21 year history while new orders are at a seven year high. Production also rose while new export orders gained thanks to stronger global demand and the weaker dollar.

With the non-manufacturing at 59.9 and the manufacturing ISM index at 59.1 versus a break-even 50 level the US economy looks in fantastic shape right now with tax cuts and the possibility of infrastructure investment adding more fuel to the fire. With wage growth also showing signs of life there is going to be growing pressure for the Fed to raise its economic forecasts and signal the potential for four rate hikes when they update their numbers at the March FOMC meeting.

It will take something really big to prevent a March rate hike, with the most likely factor probably being a damaging government shutdown. In that regard Thursday is the next key date and so far there has been little sign of movement to break the deadlock.

Following the better than expected non-manufacturing survey, Anthony Nieves, chair of the Institute for Supply Management, said:

The non-manufacturing sector reflected strong growth in January after two consecutive months of pullback. Overall, the majority of respondents’ comments are positive about business conditions and the economy. They also indicated that recent tax changes have had a positive impact on their respective businesses.

Here are some of the comments from those taking part in the ISM survey:

  • “Executive management [is] excited about tax breaks for CapEx purchases in [the] new tax bill.” (Information)
  • “Month-over-month steady growth, on average, [is] 3 percent on project volume and 1 percent on total revenue.” (Construction)
  • “Signs of strong growth [in] financial performance expectations given the recent tax changes.” (Finance & Insurance)
  • “Positive outlook for 2018. We see huge pricing pressure.” (Health Care & Social Assistance)
  • “Business is starting off solid.” (Accommodation & Food Services)
  • “First quarter begins slow like 2017, but expect things to pick up later in Q1. Outlook continues to look bright for 2018.” (Professional, Scientific & Technical Services)
  • “Business activity is low due to the continued partial funding [of] bills passed (continuing resolutions).” (Public Administration)
  • “Overall, sales velocity looks strong. Some regional differences due to weather conditions, but overall, a strong month.” (Wholesale Trade)

Part of the reason for the current volatility in the stock market is the prospect of the Federal Reserve raising US interest rates perhaps four times this year, as wage growth and inflation pick up. Dennis de Jong, managing director at UFX.com, said:

The latest non-manufacturing figures may not be ground-breaking but the above expectations uptick will certainly be welcomed by the US government as it looks to further establish its jobs-boosting credentials.

President Trump continues to boast of the success of his infrastructure investment and tax reforms, with the labour force and market growth both seemingly in rude health. The question now will be how these will affect interest rate decisions and how early the next hike will come.

The markets have already priced in a heavy chance of a rate rise under new Fed Chair Jerome Powell next time out, and with a buoyant economy, stronger downward pricing pressures may well be needed in the coming months.

Jerome Powell (right) is sworn in today as the new chair of the Federal Reserve.
Jerome Powell (right) is sworn in today as the new chair of the Federal Reserve. Photograph: Saul Loeb/AFP/Getty Images

US non-manufacturing survey at highest for more than 12 years

And here’s the other US service sector survey, and that has come in much stronger than expected.

The ISM non-manufacturing PMI rose from 56 in December to 59.9 last month, better than the forecast figure of 56.5. This is the highest since August 2005, and will give more fuel to the argument that the Federal Reserve is likely to raise interest rates several times this year.

And here’s a White House reaction to the current market turmoil, courtesy of CNBC:

The US service sector is growing in line with expectations, according to the latest Markit survey.

Its final service sector PMI for January came in at 53.3, in line with the initial estimate and down from the December figure of 53.7.

The composite reading was also as forecast at 53.8, slightly lower than December’s 54.1.

In a few minutes, we get the day’s other US data, the non-manufacturing survey from the Institute for Supply Management.

One of the biggest US fallers is Wells Fargo after the Federal Reserve announced on Friday that the bank would be barred from growing past its $1.95tn assets, until it had improved its governance and controls.

Wall Street opens sharply lower

After Friday’s falls, US markets are continuing their decline, as investors continue to worry about rising interest rates and the removal of central bank support.

The Dow Jones Industrial Average, which dropped 666 points on Friday, is down another 214 points or 0.8% in early trading. This is, so far, a better performance than the worst predictions.

Meanwhile the S&P 500 opened down 0.94% and the Nasdaq Composite fell just over 1%.

The FTSE 100 is currently down 1.13% at 7359, but is off the day’s low of 7334.

And with the weaker than expected UK services sector survey, the pound is continuing to decline, down 0.7% at $1.4019.

Updated

Wall Street futures have come off their worst levels, with the Dow Jones Industrial Average now tipped to open around 153 points lower.

Here’s Associated Press’s markets round-up:

The German stock exchange in Frankfurt today.
The German stock exchange in Frankfurt today. Photograph: STAFF/Reuters

Stock markets around the world took another pummelling on Monday as investors continued to fret over rising U.S. bond yields.

In Europe, Britain’s FTSE 100 lost 1.4% to 7,343 while France’s CAC 40 slid 1.4% to 5,288. Germany’s DAX shed 1% to 12,654.

Wall Street was poised to open lower with Dow futures and the broader S&P 500 futures down 1%.

Market jitters have spread after last week’s performance in U.S. stock markets, when they endured their worst week in two years amid worries over rising Treasury yields. Fears of a sharp drop have ratcheted higher after 2017’s strong performance carried over into January.

An upbeat U.S. jobs report showing higher than expected wage growth was the catalyst for the latest sharp sell-off on Friday, further stoking speculation the Federal Reserve will need to raise interest rates faster than expected to counter inflation.

Higher bond yields make it more expensive for companies to borrow and potentially depresses the U.S. economy and earnings. They also can make bonds more attractive to investors than stocks.

Craig Erlam, senior market analyst at OANDA in London, said:

“We’ve seen a sharp increase in U.S. bond yields over the last week after the Federal Reserve released a more hawkish than expected statement (on Wednesday), alongside its monetary policy decision, and the jobs data reported a significant increase in earnings.”

“Markets now have three rate hikes this year more than 50 percent priced in and some people are even anticipating a fourth, which is unusually ahead of current Fed forecasts.”

Madrid’s Stock Exchange today.
Madrid’s Stock Exchange today. Photograph: Fernando Alvarado/EPA

The pound is also having a bad day. It’s currently down 0.5% against the US dollar at $1.4045, a one-week low.

Brexit uncertainty may be hurting sterling, as the UK cabinet argues over Britain’s future trading relationship with the EU:

The sell-off across Europe’s trading floor is intensifying, dragging the Stoxx 600 down 1.3%.

This means European stock markets have now fallen pretty steadily for a week.

And here’s why! The Wall Street futures are deteriorating, suggesting the Dow Jones industrial average could shed 300 points (on top of Friday’s 665 slump).

Shares in London are dropping deeper into the red, following the news that Wall Street will fall at the open (at 2.30pm UK time).

The FTSE 100 is now down 98 points, or 1.3%, at 7,344 points - a new two-month low.

Hussein Sayed, chief market strategist at FXTM, says investors are reacting to the prospect of higher interest rates this year.

The era of cheap money is ending, and for markets who got addicted to it, it’s undoubtedly bad news

Societe Generale (SG) are also concerned that shares and bonds are both falling.

Don’t panic!

That’s the message from Mark Haefele, global chief investment officer of wealth management at UBS.

He argues that investors should sit tight, rather than ditching shares in response to the sell off.

Maefele writes

“We don’t believe that now is a time to reduce exposure to stocks.

As long as the recent rise in bond yields moderates, we are confident that market conditions will remain orderly.”

Mihir Kapadia, CEO and Founder of Sun Global Investments, points out that markets did enjoy stellar returns last year:

The start of the week has been a mirror image reversal to the optimism expressed in the start of the year and indeed in the last thirteen months when many major markets had raised over 25%-40%.

After such a great performance some meaningful pullback is to be expected. The FTSE 100 has shed more than 1% this morning within hours of opening, taking the index under 7400. This also ends the remarkable rally that the markets have been experiencing the past year.”

A visual representation of a Bitcoin.

Ouch! Bitcoin is now down 6% at $7690, a new two and a half-month low.

Updated

US stock market expected to open lower

A Wall Street street sign outside the New York Stock Exchange

The futures market is indicating that America’s stock market will fall at the open, extending last week’s declines.

The Dow is being called down 130 points, a drop of around 0.5%, having shed 665 points on Friday night.

That’s not a crash (of course!) but it may add to concerns that the market is experiencing a substantial correction after a very strong year.

James Hughes of AxiTrader says:

Stocks look like they are set for a correction of some sorts after huge losses over the last few sessions that has left many bulls worried that the bull run may have come to an end. On Friday the Dow dropped over 600 points with the S&P and Nasdaq following suit. This morning Europe is catching the virus and is aggressively lower.

The issue with this kind of fall is that it becomes a snowball effect, and after such astronomical gains since election day 2016 the falls can be equally as aggressive, but nobody could say that a correction hasn’t been due.

Jeremy Warner of the Daily Telegraph fears that a major stock market correction is looming.

Today’s losses mean that FTSE 100 has shed around 5% since mid-January.

But it’s still around 2.5% higher than a year ago:

The FTSE 100
The FTSE 100 Photograph: Thomson Reuters

Newsflash: Another 452 workers at stricken UK outsourcing group Carillion are being made redundant.

That’s on top of the 377 who were laid off on Friday.

That flurry of data hasn’t changed the mood in the markets.

The UK’s FTSE 100 and the European Stoxx 600 are both at two-month lows, as the global share rout continues.

Rebecca O’Keeffe, Head of Investment at interactive investor, says:

Volatility has returned with a vengeance and investors who had been hoping that the new week would see some respite from the selling have been left disappointed.

European equity markets have now erased all their year to date gains as the market has reversed its euphoric start to the year and left investors with nowhere to hide.

UK services sector growth hits 16-month low

Newsflash: Growth in Britain’s service sector slowed sharply last month, as Brexit fears hit companies.

That’s according to data firm Markit, whose UK service sector PMI fell to 53.0 last month, down from 54.2 in December and closer to the 50-point mark that shows stagnation.

This is the weakest reading since September 2016.

Service sector bosses reported a slowdown in new work -- due to “the loss of existing clients and lingering concerns surrounding the UK’s exit from the EU”.

UK service sector PMI

Last week, Markit reported that UK manufacturing slowed in January, while construction slipped towards stagnation.

Chris Williamson, chief business economist at IHS Markit, says Britain’s economy seems to have slowed.

“The pace of UK economic growth slowed sharply at the start of the year as January saw a triple- whammy of weaker PMI surveys.

“Service sector expansion slid to a 16-month low, reflecting a marked waning in growth of demand for business and consumer-facing services such as hotels and restaurants. Demand for transport and communication services was down for the second straight month.

“The softer service sector growth follows news of the manufacturing upturn losing momentum at the start of the year and a near-stagnant construction sector. All together, the PMI surveys point to the slowest pace of expansion since August 2016.

“While the fourth quarter PMI readings were historically consistent with the economy growing at a resilient quarterly rate of 0.4-0.5%, in line with the recent GDP estimate, the January number signals a growth rate of just under 0.3%

Quite a contrast with the eurozone, which posted its strongest month in over 11 years....

Updated

No sign of a recovery in the markets. After almost 90 minutes trading the FTSE 100 is still down 80 points, with most shares in the red.

UK car sales fall again

The slump in British car sales has continued.

The number of new car registrations shrank by 6.3% year-on-year in January, with 163,615 vehicles driven away.

Diesel sales suffered another sharp slump, down 25.6% during the month. The Society of Motor Manufacturers and Traders blamed “confusion over government policy” towards diesel cars, following the emissions scandal.

UK car sales

The SMMT says:

Demand fell across the board, with registrations by business, private and fleet buyers down -29.7%, -9.5% and -1.8% respectively. Meanwhile, continuing the trend of recent months, dual purpose cars (SUVs) were the only vehicle segment to see growth, with demand up 6.6% to account for a fifth (20.2%) of all new car registrations.

Demand in all other segments fell, with the biggest declines affecting the mini, MPV and executive segments.

Petrol sales rose by 8.5%, while electric cars surged by 23.9% compared with a year earlier.

UK car sales shrank in 2017, for the first time in five years.

Updated

Some good news! The eurozone’s private sector has posted its strongest monthly growth in over a decade.

Markit’s ‘composite eurozone PMI’, which tracks activity across the region, rose to 58.8 in January from 58.1 in December. That’s the highest reading since June 2006, and shows Europe’s economic recovery remains on track.

Here’s the details:

Eurozone PMI, the details.

Bitcoin falls as Lloyds imposes ban

Bitcoin is also having a rough morning, after a UK bank launched a crackdown.

The digital currency has shed 3.5% to $7,889, close to the two-month low it hit on Friday.

Overnight, Lloyds Banking Group announced it has banned credit card customers from buying bitcoin. It fears that they could be left nursing heavy losses if prices fall.

Anyone who bought bitcoin last December, when it peaked at around $20,000, has already suffered sharp losses....

Analyst: Ugly scenes in the City

We’re seeing an rough start to trading in London, says Connor Campbell of City firm SpreadEx, with all January’s and most of December’s gains now been wiped out.

Campbell writes:

There were ugly, ugly scenes after the bell, as the market-wide sell-off gathered pace on fears that global interest rate are, sooner rather than later, going to be heading higher.

The FTSE quickly shed 1% this Monday, taking the index to sub-7400 levels not seen in 8 weeks. The UK index’s sharp losses over the last 3 weeks have effectively wiped out the remarkable, record-breaking rise it saw in the pre- and post-New Year period, with little good news on the horizon to rescue it from its current levels.

Nearly every share on the FTSE 100 has dropped this morning, as the blue-chip index slides to its two-month low.

Mobile phone network operator Vodafone is leading the selloff, following reports that it could buy European assets from Liberty Global. Budget airline easyJet is also under pressure, after rival Ryanair warned that trading this year could be tougher than expected.

The only risers are DIY chain Kingfisher and hotels and coffee shop chain Whitbread.

The best and worst performers in London today
The best and worst performers in London today Photograph: Thomson Reuters

Traders will be watching nervously to see how the US stock market opens in five hours time, says financial analyst and journalist Louise Cooper.

Other European stock markets are also falling in early trading, dragging the benchmark Stoxx 600 down by over 1%.

Fears over the bond market (see earlier post), and the looming prospect of higher interest rates are hitting shares in Frankfurt, Paris, Madrid and Milan.

European stock markets this morning
European stock markets this morning Photograph: Thomson Reuters

Naeem Aslam of Think Markets argues that this ‘correction’ is overdue.

The biggest sell-off for the equity markets in nearly two years is here as investors are reacting to surging global bond yields.

Friday’s equity markets rout is likely to extend as the futures of the US stock indices are indicating.

However, there isn’t much to worry about because corporate profits are still rising and chances of US recession are remote. So this may only be a healthy pullback which the investors have been waiting for some time. A 10% correction could take place as this was long overdue. In other words, the long-term momentum for the equity markets is only easing off as these markets have been defying the Newton Law of Gravity.

Investors in London are playing catch-up after Friday afternoon’s sharp selloff on Wall Street (which accelerated after UK traders had gone home for the weekend).

Jasper Lawler of CMC Markets explains:

The next day after an unusually big sell-off is always a big test of a market’s strength. A repeat of anything close to the 2% decline seen in US indices on Friday could trigger a prolonged period of risk-off sentiment. Last week the S&P 500 dropped -3.8%, with the energy sector leading the declines.

After gains of 6% in January, the first few days of February were always going to be at risk of profit taking.

FTSE 100 hits eight-week low

And we’re off!

Trading is underway in the City, and there are losses across the board as investors join the global sell-off.

Britain’s FTSE 100 has shed 80 points, or 1.1%, taking the blue-chip index down to 7360 points. That’s its lowest level since 8th December.

The FTSE 100 over the last three months
The FTSE 100 over the last three months Photograph: Thomson Reuters

Updated

Shane Oliver, chief economist at AMP Capital, reckons that the markets could suffer a 10% fall - but not a full-blown crash.

He writes:

The past week has seen shares come under pressure as Fed rate hike expectations increased, partly reflecting an acceleration in US wages growth, and the bond yield rose sharply. From their recent high, US shares have fallen 3.9% making it the deepest pullback since a 4.8% fall prior to the November 2016 US election. It’s likely the pullback has further to go as investors adjusts to more Fed tightening than currently assumed – we see four (or possibly five) Fed rate hikes this year against market expectations for three - and higher bond yields.

This will impact most major share markets, including the Australian share market which is vulnerable given its high exposure to yield plays like real estate investment trusts and utilities. However, the pullback is likely to be just an overdue correction (with say a 10% or so fall) rather than a severe bear market – providing the rise in bond yields is not too abrupt and recession is not imminent in the US with profits continuing to rise. So the two key questions are how severe the back up in bond yields will be and whether a recession is approaching?

Updated

Bonds are falling

Government bonds are falling in early trading, extending their recent losses.

The yield, or interest rate, on German 10-year bonds has hit its highest level since September 2015. It’s still low in historical terms, at just 0.77%, but it shows that prices have hit their lowest in almost two and a half years.

Bonds are being hit by worries about rising inflation, which would put pressure on central banks to raise interest rates.

US government debt (Treasury bills) have weakened sharply - pushing the yield on 10-year Treasuries to a four-year high.

The yield (interest rates) on US 10-year treasury bills
The yield (interest rates) on US 10-year treasury bills Photograph: Bloomberg TV

UK government debt is also weakening, pushing up the yield on 10-year gilts to the highest level since May 2016.

Introduction: The global sell-off deepens

Pedestrians walk past a stocks display board showing the Hang Seng Index in Hong Kong today.
Pedestrians walk past a stocks display board showing the Hang Seng Index in Hong Kong today. Photograph: Anthony Wallace/AFP/Getty Images

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

The financial markets are a sea of red this morning, as the biggest sell-off since Donald Trump won the US presidency gathers pace.

Investors are increasingly spooked that global interest rates are heading higher, bringing the long era of loose monetary policy and easy money to a close.

On Friday, Wall Street suffered its biggest decline since the Brexit vote. The Dow tumbled by 2,5%, or almost 666 points in a nervy selloff (the biggest points fall since the collapse of Lehman Brothers.

Europe and Asia are now following suit. Over in Japan, the Nikkei has fallen by 2.5% – it’s biggest fall since the US presidential election in November 2016. There were also losses in South Korea (-1.1%) and Australia (-1.5%).

Asian stock markets today
Asian stock markets today Photograph: Bloomberg TV

Greg McKenna, chief market strategist at AxiTrader in Australia, warns:

“It’s going to be a nervous start to the week for traders across all markets as they wonder if last week’s reversal in US stocks and the ugly close Friday ... is likely the start of something bigger,

In London, investors are bracing for the FTSE 100 to shed more than 1% when trading begins at 8am GMT.

Government bonds are also falling, amid growing concern that America’s central bank will hike borrowing costs more aggressively than expected.

Some analysts think that Fed could raise rates four times this year – the market had previously only priced in three rises.

Traders will also be watching for a new healthcheck on the world’s service sector companies.

The agenda

  • 9am GMT: Eurozone service sector PMI for December
  • 9.30am GMT: UK service sector PMI for December
  • 9.30am GMT: Sentix survey of eurozone investor confidence
  • 3pm GMT: US service sector PMI for December
  • 4pm GMT: European Central Bank president Mario Draghi speaks at the European Parliament, Strasbourg

Updated

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