FTSE 100 Down Sharply On US Rate Hike Signal

Signs of a US interest rate hike next month have seen the FTSE 100 post its biggest one-day fall since it was convulsed by global market turbulence earlier this year.

London's leading share index plunged by 112.4 points, or 1.82%, wiping £29bn off the value of its constituent companies.

It (Other OTC: ITGL - news) was the biggest one-day fall in percentage terms since 11 February when a world shares rout saw the FTSE 100 fall to lows close to the 5,500-mark - levels not seen since 2012..

The index has recovered much of the ground lost over the nightmarish start to 2016 but the latest session saw it close at just above 6,050 – heading back close to the 6,000-mark.

It came after US central bank officials on Wednesday paved the way for another interest hike next month.

Minutes of the US Federal Reserve's latest meeting indicated that most policy makers felt it would be "appropriate" to raise rates at their meeting of 14-15 June if the economy continues to show improvement.

The Fed – led by chair Janet Yellen – lifted interest rates by 0.25% in December after seven years at near zero but expectations about further increases this year have since been dampened following signs of a global economic slowdown as well as market turbulence.

Its hint of a hike taking place in June took markets by surprise and sent shares lower as it pointed to a further tightening of the cheap money policy that has helped nurse the world's biggest economy back to health after the recession.

A US rate rise is also seen as likely to hurt investments in emerging markets and have a knock-on effect for the London-listed commodities firms selling metals and other raw materials to those developing countries.

Mining firms had a tough session on the FTSE 100, with Fresnillo (Other OTC: FNLPF - news) down 7% and Anglo American (LSE: AAL.L - news) off by 4%, while oil major Royal Dutch Shell (Xetra: A0ET6Q - news) slipped by 4% too.

Alton Towers owner Merlin and Royal Mail (LSE: RMG.L - news) were also among the big fallers after poorly-received updates on performance.

Stock markets in the US and Europe were also lower.