Market spooked by currency falls across the globe

CITY nerves will be tested again next week after shares tanked to a five-week low yesterday amid fears about growth in emerging markets.

London’s FTSE 100 index shed 109.54 points or 1.6 per cent to close at 6,663.74 – its biggest single-session percentage drop this year.

Stocks exposed to emerging markets, including Aberdeen Asset Management, suffered the biggest losses, knocked by a sell-off in Latin American currencies. It came as Argentina’s central bank gave up its battle against the peso’s decline.

In Paris, the Cac-40 index fell 2.8 per cent while Germany’s Dax was down by 2.4 per cent.

Michael Hewson, chief market analyst at CMC Markets UK, said: “After initially looking as if they would open higher this morning, European markets fell flat on their faces as the emerging market currency rout continued, with the Argentine peso, Indian rupee, Turkish lira and South African rand all amongst the worst decliners, as economic growth concerns start to spread out beyond China.

“With expectations rising that the Federal Reserve will continue to taper next week, de-risking is continuing to see capital flow into safer havens with gold, the Japanese yen and the dollar the main gainers.”

Argentina said it would be relaxing its strict foreign exchange controls, a day after the peso suffered its steepest daily decline in 12 years. Locals will be able to buy dollars for savings starting on Monday, reversing a ban imposed in 2012, and the surcharge on money exchanges will drop as well.