China fears send world markets falling
The FTSE 100 Index dived by more than 2% today after economic worries and a slump in China’s stock market sent a shiver through investors worldwide.
London’s top flight index fell by as much as 160.6 points, hitting 6274.1 at one point, as tensions over Iran also caused alarm.
The benchmark index has not fallen more than 2% in one day since last June, when more than £35bn (€52bn) was wiped off the value of London’s top shares after a series of interest rate rises across the world sent markets into a spin.
Today’s plunge also marks the end of a winning run for the FTSE 100, which has soared to highs not seen since 2001 in recent days.
The ISEQ index of Irish shares mirrored the trend, falling 290.26 points to 9594.22, almost 3%, by 4.05pm.
Markets worldwide also mirrored the FTSE’s decline, with the Dow Jones Industrial Average in the US falling by 144.8 points to 12487.5 in early trading.
Experts put most of the falls down to the slump in China, where investors worried that the government may try to cool economic growth by raising interest rates or reduce more of the money available for lending.
Hong Kong’s Hang Seng Index dived by almost 2%, while the Shanghai Composite index plunged 8.8% on profit-taking by institutional investors.
Martin Slaney, head of spread betting at GFT Global Markets, said: “China is the big story today. With rumours flying around of rate hike, taxation restructuring and share trading investigations, this uncertainty is being factored into prices.”
He added the falls seen today were likely to be “nothing more than a short-term knee-jerk reaction to the China sell-off”, raising hopes that the London market correction may be short lived.
The FTSE 100’s decline has also been attributed to rumours that the South African government may introduce a windfall tax on the mining industry, which saw a raft of mining firms on the fallers’ board.
Shares in mining firm Lonmin had dropped the most by the afternoon session, falling 232p, or 7%, to 3142p.
Meanwhile, negative comments from former US Federal Reserve chief Alan Greenspan contributed to the stock price decreases, after he warned the world’s biggest economy may fall into recession by the end of the year, saying the US budget deficit remained a major hurdle for economic growth.
London shares also reacted badly to rising oil prices, which soared past 60 US dollars a barrel earlier today as the UN Security Council met in London to discuss tightening sanctions in Iran, Opec’s number-two oil producer.
