Britain’s leading share index has plunged sharply into the red for the second time this week as inflation fears grip global stock markets.
The FTSE 100 fell by as much as 180 points, or about 2.5%, in early trading – wiping around £48bn off the combined value of its constituent companies.
Similar falls were seen across Europe, taking their cue from a major sell-off on Wall Street on Wednesday which extended to Asian markets overnight.
By lunchtime the FTSE had recovered much of its losses though was still trading about 90 points, or 1.3% lower on the day.
The market volatility followed figures showing a bigger than expected slump in US inflation, which investors fear could put pressure on America’s central bank, the Federal Reserve, to lift ultra-low interest rates.
In London, heavyweight fallers included mining giants Anglo American and Rio Tinto and oil majors Shell and BP.
Burberry, the luxury fashion group, was the biggest loser with a drop of 8% following the publication of its annual results while BT – which also published its full-year figures on Thursday – slipped 4%.
Russ Mould, investment director at AJ Bell, said: “Yesterday’s US inflation shock fuelled the growing belief that central banks will have to take action sooner rather than later when it comes to raising interest rates.
“The world wanted economic recovery, but it appears to be happening too fast and the actions required to cool it down aren’t favourable to stock markets.”
The latest sell-off added to a slump seen earlier this week which was in part prompted by Chinese data showing a higher than expected increase in factory gate prices – seen as another inflation warning light.
Thursday’s market downturn also saw the oil price fall, with Brent crude dipping 2% to less than $68 a barrel – attributed to the deepening coronavirus crisis in India.
On Wednesday, New York’s Dow Jones and S&P 500 had finished about 2% lower, while the tech-heavy Nasdaq tumbled by 2.7%.
Stock markets have been recovering strongly since a big sell-off early last year when the scale of the COVID-19 pandemic started to become clear.
Since then, Wall Street has hit new record highs and though the FTSE’s fightback has been more muted, it recently topped the 7,100-mark for the first time in more than a year.
The latest falls have sent the London index sliding back towards 6,800.