STOCK markets resumed their roller-coaster ride yesterday as more dismal economic figures from China set off renewed turbulence in the FTSE 100 Index.
London’s top flight dived by 3 per cent, or 189.40 points, during the session to end at 6,058.54 – wiping almost £50 billion off the value of listed companies.
Fears over the health of China, the world’s second biggest economy, have weighed increasingly on investor sentiment over recent weeks, with the FTSE 100 seeing its worst calendar month for more than three years in August.
It culminated in a “Black Monday” one-day fall of 4.7 per cent last week, though stocks recovered in the last couple of sessions before the bank holiday weekend.
But trading screens turned red again after the three-day break following a report showing Chinese manufacturing at a three-year low last month.
The UK’s manufacturing sector also posted a sluggish performance, with jobs falling for the first time in more than two years – while US figures showed growth in the same sector at its slowest since May 2013.
Hints over the weekend that the timing of interest rate increases by the US Federal Reserve and the Bank of England would not be put back because of the volatility over China also created jitters.
The FTSE 100 opened sharply lower, along with Germany’s Dax and France’s Cac-40, with the losses intensifying later in the session. On Wall Street there were also heavy falls, with the Dow Jones Industrial Average ending the day 469.68 points, or 2.84 per cent, lower at 16,058.35.
Tony Cross, market analyst at Trustnet Direct, said: “We may have a new trading month under way, but there’s no sign of any improvement in sentiment for equity markets. Traders remain unnerved about the prospects for growth is China.”
Sentiment was also hit by remarks from Bank of England governor Mark Carney over the weekend that China’s economic problems were “unlikely” to derail plans to raise interest rates in the UK – currently expected early next year..
The Chinese slowdown and rattled investor confidence had prompted expectations that increases might be taken off the agenda in the short term in both the US and UK, where the cost of borrowing has remained at 0.5 per cent for more than six years.
Miners were hardest hit again in the latest FTSE 100 sell-off as the Chinese manufacturing report showed a contraction, signalling slowing demand for commodities. Glencore dropped 9 per cent, while Anglo American was 8 per cent lower.
Chinese authorities have arrested almost 200 people – including journalists, brokers and regulators – in what they claim is a campaign against those accused of spreading rumours and undermining faith in its stock market.
China has also sought to boost flagging growth, last week slashing interest rates for the fifth time in nine months and recently devaluing its currency, the yuan.