Stock Market Volatility As £48bn Wiped Off FTSE

It (Other OTC: ITGL - news) has been another volatile day on global stock markets with the FTSE 100 index of leading UK shares closing down 3%.

Around £48.5bn was wiped off the value of the Footsie following another round of weak Chinese economic data and fears of a US interest rate rise.

Stock averages across Europe were more than 2% lower on Tuesday, extending losses from the previous day.

The London stock market was shut on Monday due to a bank holiday but it closed down 189 points to 6059 on Tuesday.

US stocks also suffered, with the Nasdaq Composite down 2.3% in early deals following Wall Street's worst month for values in three years during August

There were several reasons for the latest slump in prices following the volatility of the previous week.

Monday's nose-dive followed comments by a senior US central banker that were seen as a sign that borrowing costs may be raised from historic lows as early as this month despite the recent market turmoil over China.

Fed vice chairman Stanley Fischer had told the annual Jackson Hole central bankers' symposium that US inflation was likely to rebound, allowing rates to rise gradually.

The remarks were interpreted as a hint that rates could rise as early as this month - a potential shock for markets that have become accustomed to cheap credit thanks to monetary policies such as rock-bottom rates and quantitative easing.

Investors reacted on Tuesday to further evidence of the economic slowdown in China with figures suggesting manufacturing activity was at a three-year low.

The slowdown in China has been a major factor behind the sharp falls in oil prices.

There was a 25% recovery in the cost over the three trading days to Monday - with Brent Crude losing some of that ground again on Tuesday, levelling out at around $52 per barrel from six-year lows last week.

The rises were put down to downward revisions to US crude production and evidence that the OPEC cartel of oil producers may consider production cutbacks.

However, the focus remained on stock markets given so-called Black Monday in China just over a week ago and the government's efforts to bring stability to shares.

China's Shanghai Composite was weak on Tuesday, closing 1.3% lower with investors continuing to count the cost of the lack of confidence.

The country's top index has lost more than 40% of its value during the past two months.

The Nikkei in Japan lost 3.8% on Tuesday, reflecting not only the concerns over rising US rates but also slowing domestic demand in the manufacturing sector.