Growth fears drive FTSE 100 to two-year closing low - as it happened
Rolling coverage of the latest economic and financial news, as UK blue-chip index stocks drop to weakest close since late 2016
- Latest: FTSE 100 slides again
- Oil has hit a 15-month low
- More fund managers expect global growth to weaken
- IFO survey shows German confidence down
- Investors worried about global economy, and Fed rate hikes
- Asia-Pacific stocks drop as Xi disappoints
9.06pm GMT
And finally, Wall Street has closed a little higher, but with plenty of jitters around.
The Dow gained 83 points, or 0.35%, to 23,675 -- only a small recovery from its 2% losses on Monday, and last Friday.
Related: Trump heaps pressure on Federal Reserve over interest rate rise
8.51pm GMT
US treasury secretary Stephen Mnuchin has a theory -- the market turmoil is due to two factors -- high-frequency trading, and regulations brought in after the last financial crisis.
Mnuchin singled out the Volcker Rule, which prevents banks from banks from taking risky bets with their own money, or pumping it into hedge funds.
In my opinion, market structure has led to a lot more volatility. Part of this is a combination of the market presence of high-frequency traders combined with the Volcker Rule."
7.18pm GMT
Get caught up on the markets:
Related: Why are markets falling, and are we heading for global recession?
5.22pm GMT
The US stock market is clinging onto its gains, with the S&P 500 still up almost 1% today.
Oil, though, continues to wallow at 15-month lows as traders anticipate weak demand in 2019.
US #stocks up, but #oil nose-diving today
WTI = $47...vols up 30% pic.twitter.com/HujWozDiwG
5.05pm GMT
Stock market analyst Ronnie Chopra suspects that some UK companies are now vulnerable to a takeover bid, following recent stock market losses....
UK equities extremely unloved but with fundamentals so attractive in terms of price there are certainly bargains to be had in the medium term. Weak pound must highlight the value of the FTSE 100 which has plenty of potential of bid targets which are 40-50% cheaper to US peers. https://t.co/gApLyRzsxv
4.48pm GMT
Newsflash: Britain's blue-chip stock index has just hit its lowest closing level in over two years.
Amid worries over the global economy, and Brexit, the FTSE 100 has closed 71 points lower at 6701.
New 2018 closing low on the FTSE...
Related: Energy shakeup could cut bills by 45 a year
European Closing Prices:#FTSE 6701.59 -1.06%#DAX 10740.89 -0.29%#CAC 4754.08 -0.95%#MIB 18644.85 -0.26%#IBEX 8700.8 -1.27%
4.33pm GMT
The Brent crude oil price has also slumped to its lowest level in over a year.
Brent, sourced from the North Sea, is down almost 4% at $57.28, the lowest since October 2018.
4.16pm GMT
Despite today's small recovery, this month is turning into one of the worst December's in Wall Street's history.
Indeed, Reuters has calculated that it could be the worst December since the Great Depression....
The Dow is down 7.8% and the S&P 500 is down 7.6% this month. That's the worst December performance since the Great Depression. https://t.co/tfsHna173T pic.twitter.com/7lQmisApfP
4.03pm GMT
Global growth fears are sending the oil price sliding again.
US crude has dropped below $48 per barrel for the first time since mid-September, 2017, extending recent losses.
The oil price is just slipping to another fresh 15-month low. US crude has now lost 37% in the last 2.5 months. pic.twitter.com/rKe0lo8Naw
3.59pm GMT
Back in London, the FTSE 100 is falling close to a two-year low.
The blue-chip index is now down 52 points, or 0.75%, at 6,721. That's less than 20 points away from the 25-month low struck earlier this month.
3.47pm GMT
Although Wall Street is still up, a 1% rise isn't anything to shout about - given the Dow lost 2% on both Friday and Monday.
David Madden of CMC Markets thinks the rally lacks conviction, despite the welcome pick-up in US house-building reported today.
Equity markets have bounced back today, but the upward move hasn't been driven by anything, and that is a little worrying, as it might just be a mixture of short covering and bargain hunting. The severe sell-off that was endured yesterday is still fresh in traders' minds, and there is a sense that dealers want to get tomorrows Fed announcement out of the way, before formulating their next move.
For a change, there was some upbeat housing data from the US. Building permits ticked up to 1.32 million in November, which topped the forecast of 1.25 million. Keep in mind, the October reading was 1.26 million. The housing starts reading was 1.25 million, which was an improvement on the 1.21 million in October. Admittedly, these figure weren't amazing, but they are a bright spot on a largely bleak housing figures.
3.34pm GMT
The Wall Street rally is being led by consumer-focused companies including Nike (+2.4%), and Visa (+1%).
Industrial firms such as Boeing (+3.75%) and General Electric (+3.6%) are also up, as are financial stocks such as JP Morgan (+1.8%).
The greenback has been undermined by growing speculation that, at best, the Federal Reserve will deliver a dovish rate hike, while there is a possibility - a small possibility, but a possibility nonetheless - that it could even hold off hiking altogether.
2.45pm GMT
Most sectors of the US stock market are up, as traders try to shake off the pessimism gripping the markets.
Bank share are rallying, after several tough weeks.
gmorning pic.twitter.com/xncGmQIqgA
2.33pm GMT
Ding Ding! Wall Street is open, and shares are trying to recover after yesterday's rout.
U.S. stocks rise at the open https://t.co/LpgZzBwLBv pic.twitter.com/stEpZmaDAI
2.20pm GMT
Economist Ian Shepherdson makes a good point about the US housing stats:
*All* the drop in single-family housing starts in November was in the West; hard to imagine this was not due to the wildfires. Elsewhere, single-family starts up 3%, permits unchanged. Reports of the death of the housing market are greatly exaggerated. pic.twitter.com/wdXzUMWvOx
1.59pm GMT
Just in: Home construction in America accelerated last month, in a sign that the economy can handle higher interest rates (whatever Donald Trump tweets).
New housing starts jumped by 3.2% last month to an annual rate of 1.256 million, the Commerce Department says. That's a seven-month high.
These figures could weigh a lot on tomorrow's interest rates decision by the #FED #FOMC as the ongoing rising cost of borrowing in the US are taken as one of the main cause of real economy's slowdown, especially in financial and real estate business @graemewearden @bpprimeuk
A data dependent Fed is likely to interpret the Nov US housing starts & permits data as in line with their forecast of solid growth and supportive of a rate hike tomorrow.
1.27pm GMT
Here's CNBC's take:
Investors are fleeing stocks and buying bonds in record numbers amid the global sell-off in equities, according to a December survey of fund managers released on Tuesday.
"Investors are approaching extreme bearishness ... this month's survey [found] the biggest ever one-month rotation into the asset class" of bonds, Bank of America Merrill Lynch said in the survey. The research report is one of the most widely-followed surveys of investors on Wall Street.
Investors rush into bonds in record numbers as global economic outlook falls to worst in 10 years. https://t.co/VArLznTlXv pic.twitter.com/bjlgVVp8UN
1.10pm GMT
Phew! After two days of serious losses, Wall Street is expected to rally when trading begins in 80 minutes time.
The Dow is predicted to rise by over 200 points, having shed more than 500 on Monday.
US Opening Calls:#DOW 23841 +1.05%#SPX 2571 +1.03%#NASDAQ 6518 +1.06%#IGOpeningCall
1.08pm GMT
The Financial Times (PAYWALL) is concerned by BAML's survey of investor confidence, showing they are the gloomiest since 2008.
Their Adam Samson writes:
Investors have made the largest-ever shift into bonds this month, according to a widely-watched survey that also showed bets on global equities falling to the lowest in two years as concern over the economic outlook increases.
Global investors' net underweight position in bonds tumbled 23 percentage points in December to 35%, according to data released on Tuesday by Bank of America Merrill Lynch.
"Investors are close to extreme bearishness."
Global investors make record shift into bonds https://t.co/32OL4QTjmo
12.30pm GMT
Newsflash: Donald Trump has launched another broadside at the Federal Reserve, as America's central bank begins its two-day policy meeting.
Once again, Trump is urging the Fed not to raise interest rates on Wednesday.
I hope the people over at the Fed will read today's Wall Street Journal Editorial before they make yet another mistake. Also, don't let the market become any more illiquid than it already is. Stop with the 50 B's. Feel the market, don't just go by meaningless numbers. Good luck!
12.25pm GMT
Aviva Investors are also gloomy.
Michael Grady, their chief economist, has predict that risk assets will give weaker returns in 2019, as global growth moderates.
"In a slowing growth environment, investors tend to focus more on downside risks. Although the economic backdrop continues to provide a basis for positive returns for risk assets, expectations of more moderate growth and tighter global liquidity, and the impact of those risks, justify more restrained positioning.
"We prefer to be overweight in US and emerging market equities because of the expected relative growth outperformance. Valuations in Europe look more attractive in some areas, but downside risks such as Brexit and the Italian budget continue to weigh on the outlook.
11.56am GMT
Sound the alarm bells!
Global investors are their gloomiest since the financial crisis, according to a new survey from Bank of America Merrill Lynch.
LONG USD NOW MOST CROWDED TRADE - BAML
New number one "most crowded trade" in the latest BAML fund managers survey. Long buck. Has been a reasonable contrarian indicator in the past, albeit some unwinds have taken longer than others to play out. $DXY pic.twitter.com/Sa4oE5VAwW
Fund managers want companies to batten down the hatches as pessimism over the global economy mounts, BAML's survey shows. pic.twitter.com/LXwIht5TpI
11.01am GMT
Given the recent selloff, are stocks now actually cheap? Or just low, and heading lower?
The City's finest minds are wrestling with this question as 2019 approaches. On some measures, shares are offering plenty of value, as this charts shows:
Can't get enough of this chart. The price to free cash flow multiple is now 17. Hasn't been that low since January 2012. Between the two US debt ceiling crises! The euro crisis was still going on! pic.twitter.com/vTjKfHcfX8
An oldie but a goodie, Ray Dalio edition. pic.twitter.com/OdDR8BObM6
9.43am GMT
Financial experts are concerned that German business morale has fallen again this month, according to the IFO thinktank.
IFO president Clemens Fuest says Germany's economy appears to be cooling, with most industries sending "bad signals" about their prospects (sending its business expectations measure to a 25-month low).
We think it's a permanent slowdown. Not a downturn, we still expect growth next year.
Germany's business sentiment fell to the lowest level in two years in December. My hopes for a Q4 recovery have been thoroughly squashed. #IFO pic.twitter.com/TtDE1w8WiN
German #IFO: 4th consecutive decline in business climate, weakness widespread in both manufacturing AND services this time. IFO had already downgraded Germany 2018 forecast to 1.5% from 1.9% last week, and 2019 forecast to 1.1%... Not good. $EUR
9.19am GMT
Just in: German business morale has fallen, in another sign that Europe's largest economy is struggling.
IFO, the Munich-based thinktank, says its business climate index has dropped to just 101.0 this month, down from 102 in November.
#Ifo business expectations dip to the lowest since Nov 2014, despite some stabilisation in manufacturing sector activity. The underlying #growth momentum in #Germany remains modest in Q4. pic.twitter.com/yOFFtDx6GN
9.05am GMT
Last night's Wall Street rout dragged even more US companies into 'bear market territory' - more than 20% off their all-time high.
Companies suffering this grizzly fate include tech giants such as Apple, Amazon, IBM, Netflix and Facebook, as this chart from Marketwatch shows. More here.
8.46am GMT
Kit Juckes of Socii(C)ti(C) Gi(C)ni(C)rale also blames president Xi's speech for today's gloom:
There's snow on the ground and gluhwein everywhere but the Christmas spirit is absent in financial markets.
After a miserable afternoon for US equities, this morning actually started in a bright mood on the other side of the world, before President Xi's lack of any encouragement for expectations of further reform gave markets the jitters. No white beard, no sleigh, not much bowing to external pressure"
8.29am GMT
There's no Christmas cheer in the markets today, says Hussein Sayed, chief market strategist at FXTM:
December 2018 has so far been one of the ugliest Decembers in U.S. stock market history. The S&P 500 declined 7.8% in 10 trading days and experienced the worst two-day selloff since October.
Cheaper valuations, the U.S.-China trade truce, and dovish Fed commentary were not enough to put an end to falling stock markets. Santa Clause seems to have lost his way this year, defying hopes that stocks will rally towards the year's end.
8.25am GMT
Splat! European stock markets have fallen in unison at the start of trading.
Traders are taking their cue from Wall Street; last night's selloff continues to reverberate around the markets.
US stocks sold-off yesterday as dealers were concerned about the world economy, and there is also a fear the Federal Reserve are tightening their monetary policy too fast. The S&P 500 fell to a new 2018 low, while the Russell 2000 entered a bear market.
Asian equity markets sold-off overnight on the back of the negative move on Wall Street.
8.01am GMT
Growth fears are also weighing on the oil price today.
7.51am GMT
China's president has disappointed the markets today.
Xi Jinging launched a robust attack on other nations who demand Chines policy changes (yes you, America), in a high-profile speech marking 40 years of economic reform.
"No one is in a position to dictate to the Chinese people what should or should not be done.
We must resolutely reform what should and can be changed, we must resolutely not reform what shouldn't and can't be changed."
Xi's speech comes as the Chinese leadership is facing criticism over slowing growth and confrontation with the US. Observers hoped his speech would lay out new directions or reforms needed to help the Chinese economy, weighed down by debt and lagging consumption, and an overly dominant state sector.
Instead, Xi stressed that the Party's leadership and strategy up to now have been "absolutely correct." He promised to support the state sector while continuing reforms in appropriate areas.
Related: Xi Jinping: president warns other nations not to 'dictate' to China
Great disappointment comes with great expectations.
Xi Jinping's speech on the 40th anniversary of #China's reform era fails to lift stock traders' sentiment https://t.co/6km6ur0fGF via @business
7.23am GMT
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
#FTSE100 called -50pts at 6725 pic.twitter.com/RmCCkBESHK
It is incredible that with a very strong dollar and virtually no inflation, the outside world blowing up around us, Paris is burning and China way down, the Fed is even considering yet another interest rate hike. Take the Victory!
The market's overriding fear is that the Fed will press ahead with plans to raise interest rates, which could be too much for the US economy to handle. An indication from the Fed that they will slow their pace of hikes could calm these jittery markets.
However, until the Fed have confirmed that as a course of action, investors will remain skittish. The volatility index, also known as the fear gauge lifted 2.27 points to a seven-week high.
Related: Asos shock shows UK's economic problems extend beyond high street
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