Britain’s biggest businesses dived yesterday to their lowest collective value since the financial crisis seven years ago, as further falls on the Chinese stock market sparked continuing worldwide turbulence in equities.
London’s FTSE 100 index at one stage plunged more than 6 per cent, or 400 points, as contagion from China’s growth slowdown and recent devaluation of its yuan currency spread across the globe.
The FTSE 100 pared back some of the losses later, but still closed down 4.7 per cent or 288.8 points, a loss of £74 billion and equalling an identical fall in September 2011.
Yesterday’s UK slide followed a near-9 per cent fall in Shanghai stocks yesterday, compounding an 11 per cent fall in the Chinese stock market last week. Wall Street shed 1,000 points, of 7 per cent, at the opening, but recovered to be 1 per cent down at lunchtime.
It was the Footsie’s 10th consecutive session in negative territory – the worst losing streak since it finished lower for 11 days running in 2003.
Shanghai has now lost all its gains for 2015 despite strenuous efforts by the Chinese authorities to address the economic slowdown and stock market jitters.
Global markets have been rocked in recent weeks by the Sino economic powerhouse’s slowdown and the depreciation of its currency – as well as plunging commodity prices and fears over the timing of the next US interest rate hike.
Meanwhile, in further bad news the Brent crude oil price fell more than 6 per cent, or $2.95, yesterday to a six-and-a-half year low of $42.51 a barrel.
Oil prices have fallen more than 30 per cent since May, with the latest selloff triggered by the Iranian oil minister Bijan Namdar Zanganeh saying his country would expand output “at any cost” to defend its market share.
Laith Khalaf, senior analyst at Hargreaves Lansdown stockbrokers, said: “The summer slump continued into its third week as global stock markets sold off once again.
“Here in the UK the Footsie has been decimated in ten days, as fears over global growth have gripped international investors.
“It was just five months ago investors cheered as the Footsie broke through the 7,000 mark for the first time. It now looks like a very long climb back.”
Jasper Lawler, market analyst at CMC Markets, commented: “The Chinese government’s intervention into stock markets has proven counter-productive.
“Forcing institutions to buy and banning them from selling has just added to the panic of retail investors who make up 80 per cent of stock ownership in China.”
He said that one reason for anxiety spreading to global markets could be that the crisis showed China’s central bank “spectacularly failed” to stimulate the economy – at a time when their huge stimulus is underpinning recovery in Europe and the US.
The FTSE 100 index has now given up about 8.5 per cent in the year to date following a 2.7 per cent fall in 2014. One analyst commented: “As yet it is difficult to identify a positive catalyst to alter sentiment in the shorter term.”
City analysts forecast further worldwide stockmarket volatility from America to Asia in the short-term amid growing fears of a hard landing for the Chinese economy, the second biggest in the world and a voracious buyer of western products and commodities.
Didier Duret, chief investment officer at ABN Amro, commented: “It is a China-driven macro panic. Volatility will persist until we see better data there or strong policy action through forceful monetary easing.”