Yahoo Finance European markets fall as Bank of England governor warns of tough times ahead
European stock markets tumbled into the red on Friday amid warnings from the Bank of England (BoE) governor that the UK faces tough times ahead.
In London, the FTSE 100 (^FTSE) was 0.2% lower, with oil and mining stocks managing to push ahead thanks to a rise in Brent crude, while the CAC (^FCHI) fell 0.6% and the DAX (^GDAXI) was 1.7% lower.
Speaking to BBC Radio 4 on Friday, Andrew Bailey said the UK will return to a period of slow growth, with soaring energy prices meaning the economy would slow more sharply than expected.
“We've been in an unreal world for the last two years. We had a huge downturn and we've had historically fast growth in the last year or so... We're going back to a period of much slower growth,” he said.
He added that Britain was not experiencing a wage-price spiral, but pressures are starting to build.
“I'm not saying nobody gets a pay rise, don't get me wrong, but I think what I'm saying is we do need to see restraint in pay bargaining otherwise it will get out of control."
His comments come just a day after the BoE decided to increase interest rates to 0.5%. The rate rise is the second increase since the start of the pandemic, and marks the first back-to-back hike since 2004.
Read more: Bank of England increases interest rates to 0.5% amid rising inflation
Across the pond, the S&P 500 (^GSPC) rose 0.5% and the tech-heavy Nasdaq (^IXIC) advanced 1.2% after opening. The Dow Jones (^DJI) was trading flat.
It comes after the Nasdaq posted its worst one day fall since March 2020 on Thursday, a fall of 3.7% driven by a historic plunge in the stock price of Facebook's parent company. This dragged other tech stocks lower on Wall Street.
"These are eye-watering, stomach churning moves normally associated with penny stocks, and yet they are happening in companies with billion-dollar market caps, such is the fragile nature of sentiment," Michael Hewson, of CMC Markets, said.
Meanwhile, US employers added more jobs than expected last month, shrugging off a surge in COVID infections and business closures.
Nonfarm payrolls rose 467,000 in January after an upwardly revised 510,000 in December, according to the US labour department's latest jobs report on Friday. The unemployment rate rose to 4% from 3.9% the previous month.
Read more: Rishi Sunak announces £350 for UK households energy bills
Asian shares were mostly higher on Friday despite coronavirus cases still surging in Asia.
The Nikkei (^N225) climbed 0.7% in Japan while the Hang Seng (^HSI) reopened in Hong Kong from the Lunar New Year holidays, ending 3.2% up.
The Shanghai Composite (000001.SS) remained closed.
