Concoction of risks trigger global sell off to kick start week

A ratcheting up in anxieties over the possibility of the global economy hurtling toward a sharp slowdown wiped billions off the value of the world’s top companies today.

London’s FTSE 100 index plunged 2.32 per cent to points, while the domestically-focused mid-cap FTSE 250 index tumbled 2.59 per cent.

Investors ditched London stocks on the growing risk of the UK plunging into recession soon.

Last week, the Bank of England said the economy will struggle to keep its head above water for most of this and next year, caused by consumers cutting spending in the face of a possible double-digit inflation peak.

The pound took a beating against the greenback, at one point weakening 0.4 per cent to buy $1.2276. 

The hard risk-off sentiment extended into the Continent. The pan-European Stoxx 600 stumbled 2.76 per cent, while Germany’s Dax 30 lost 2.15 per cent.

Traders were skittish during the first session of the week as a combination of negative risks hit sentiment to stocks.

Fresh data from China revealed export growth has stalled on the back of Beijing plunging some of the country’s main trading hubs into lockdown, hitting oil prices.

Demand for commodities is likely to remain below potential as China continues with its zero-Covid policy. China is one of the world’s largest commodity consumers.

US bond yields whipsawed, initially rising due to investors baking in more 50 basis point rate hikes from the US Federal Reserve in the coming months.

But, strong demand for safe havens eventually pushed down yields on American government debt.

Investors fled growth stocks as they brace for the Fed to rapidly rein in accommodative policy.

The tech-heavy Nasdaq and the S&P 500 at one point both tumbled to 52-week lows. The Dow Jones also plummeted.

The Fed is widely anticipated to lift borrowing costs 50 basis points again at its next meeting, following from its steeper hike last week as it chases down the worst inflation rate in the US since the 1980s.

Traders were also focusing on the ongoing spillover economic effects of Russia’s invasion of Ukraine as Vladimir Putin delivered his annual speech in Moscow to commemorate the Soviet Union’s victory over Nazi Germany in the second world war.