US stocks sink again as European markets close

Business
NYSE tradersImage copyright Getty Images

Shares are suffering a fresh bout of market jitters as the European markets close for the day.

In London, the FTSE 100 share index tumbled 1.9% to end at 7,006 points. France’s CAC 40 index slid 1.9% to 5,106, while Germany’s DAX fell 1.48% to 11,539.

In a day of wild swings, the Dow Jones index was down 100 points at 25,498 – about 0.4% – although it had been down 350 points in mid morning.

The wider S&P 500 slid 0.65%.

The Nasdaq – which took the worst of Wednesday’s declines – was mostly unchanged.

In Asian trading earlier, the Hang Seng index in Hong Kong had plunged to a 19-month low.

Japan’s benchmark Nikkei 225 dropped 3.9%, its steepest daily drop since March. In China, the Shanghai Composite fell 5.2% to its lowest level since 2014.

Markets in Asia had followed US stocks, which made steep falls on Wednesday.

What’s driving the declines?

US markets have performed better than expected this year, bouncing back after turmoil earlier in the year to set new records over the summer.

But the Federal Reserve is raising interest rates, with the latest hike coming last month, and more increases are likely to come.

The Fed last month abandoned its description of its policy as “accommodative”, reflecting a view that the economy is strong enough not to need the kind of stimulus it received in the after-math of the financial crisis.

The prospect of dwindling US stimulus has been compounded by a trade war between the world’s two largest economy – which the IMF has warned could harm growth.


Analysis

Kim Gittleson, New York business correspondent

For traders who had got used to the seemingly inevitable march of US stock markets ever higher, Wednesday was a bit of a shock.

Here’s just one reason why: the S&P 500 didn’t record a single move up or down of more than 1% during the third quarter of 2018. That hasn’t happened since 1963, according to LPL Financial.

So what led investors to head for the exit?

As ever, it’s almost impossible to pinpoint one reason for the sell-off.

The consensus seems to be a combination of rising interest rates, tariffs and inflation led investors to worry that fourth-quarter earnings season, which begins on Friday, won’t be as record-breaking as prior quarters.

But when it comes to one of those concerns – inflation – investors got to breathe a sigh of relief on Thursday.

Just before US markets opened, the September reading of the consumer price index showed that prices rose by just 0.1% during the month, below expectations.

After the release, the mood on the floor of the New York Stock Exchange was almost instantly lightened, as the lower-than-expected reading tempered concerns that the US Federal Reserve will be forced to increase interest rates at a faster pace than expected.

The question is if calm will once more prevail on Wall Street – or if Wednesday’s dip was a harbinger of a turbulent earnings season to come.


Trump attacks ‘crazy’ Fed

The US stock market declines have prompted US President Donald Trump to renew his attacks on the Federal Reserve for its decision to raise interest rates.

He said higher rates – which make borrowing more expensive – were “far too stringent”.

“I think what the Fed is doing is wrong,” he said.

On Wednesday, he said the Fed had “gone crazy”, prompting a response from International Monetary Fund head Christine Lagarde, who said she “would not associate” Fed chair Jerome Powell “with craziness”.

Interest rates in the US remain relatively low by historic standards.

Analyst Michael Hewson of CMC Markets said it was “too simplistic to blame the Federal Reserve” for market turmoil.

“There are a number of factors,” he told the BBC. “Obviously, concerns about slowing growth – the IMF downgraded its global growth forecast for the global economy, citing emerging market concerns.”

https://www.bbc.co.uk/news/business-45820640

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