Britain’s stock market plummeted more than 3% on Wednesday, as poor data and rising trade tensions spurred fears of a global growth slowdown.
The FTSE 100 (^FTSE) closed down 3.2%, or 237.78 points lower, on Wednesday. It represents the index’s worst one-day performance since 2016. In total, an estimated £58.5bn was wiped off the collective valued of Britain’s 100 biggest listed businesses.
Multiple factors came together to spur the sell-off. One early driver was poor economic data. UK construction data released on Wednesday morning pointed to a “devastating” slowdown and came just a day after European manufacturing levels hit the lowest level since 2012.
US employment numbers, released later on Wednesday, also fuelled fears of a global economic slowdown. Private sector payroll operator ADP said 135,000 jobs were created in September, below forecasts. August’s figure was also revised sharply lower, from 195,000 to 157,000. The ADP numbers suggest Friday’s official US employment figures could come in lower than expected.
A tepid reception to the Boris Johnson’s Brexit proposals, unveiled this afternoon, did little to help the mood.
Finally, markets were shaken by the World Trade Organisation (WTO)’s decision to allow the US to hit the EU with tariffs worth $7.5bn as part of a long-running battle over illegal subsidies to French aircraft maker Airbus.
“With the economic hostilities between the US and China clearly having an impact on the global economy – just check out the week’s wave of painful PMIs – the WTO clearing the runway for an aggressive escalation on another front in Trump’s trade war is exactly the opposite of what investors wanted to hear,” Connor Campbell, a financial analyst at spreadbetting platform SpreadEx, said.
Fears of a global growth slowdown have been mounting throughout 2019. Last month the OECD cut its forecast for global growth this year to 2.9% from 3.2%. OECD chief economist Laurence Boone warned of “increasingly serious headwinds” and said: “Slow growth is becoming worryingly entrenched.”
Campbell said: “Wednesday’s casualties were widespread and on both sides. The Dow Jones lost 450 points, sinking to 26100 for the first time in over a month. The DAX, meanwhile, shed almost 300 points as it tumbled under 12000, with the CAC down 2.8% and stuck the wrong side of 5450.
“Most in need of medical assistance was the FTSE, which plunged more than 3% to sink below 7150, undoing all of September’s steady recovery in one fell swoop.”
Financial firm Hargreaves Lansdown (HL.L) was the worst performing stock on the FTSE 100, dropping 7.5% after negative broker notes on Tuesday. B&Q-owner Kingfisher (KGF.L) wasn’t far behind, closing 6.3% lower.
However, the sell-off on the London Stock Exchange was broad-based. Just two stocks ended the day in the green: Tesco (TSCO.L), which reported better-than-expected earnings; and Paddy Power-owner Flutter (FLTR.L), which announced a mammoth takeover deal.