Dow Jones plunges by 1,000 points amid fresh market turbulence

Turbulent week: Traders on the New York Stock Exchange
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Robin de Peyer8 February 2018

The US markets suffered another turbulent day on Thursday as the Dow Jones industrial average plummeted by more than 1,000 points.

After a day of losses on all key European exchanges, the Dow suffered heavy losses of more than four per cent, while the S&P and Nasdaq also fell by two per cent.

Earlier, the FTSE 100 share index in London closed down 1.49 per cent at 7,170.69 points, and indexes in Germany and France fell 2.6 per cent and two per cent respectively.

It came after the Bank of England said interest rates probably need to rise sooner, adding to expectations of reduced central bank monetary stimulus around the world.

Bond prices have weakened in the past week-and-a-half as investors adjusted for the likelihood of a stronger US economy and higher inflation, which could lead the Federal Reserve to boost interest rates more times than previously anticipated.

The drop in bond prices and the subsequent rise in yields have kept equity investors nervous about higher interest rates and inflation.

David Madden, a market analyst at CMC Markets UK, said: "Stocks are offside today as traders undo the positive move from yesterday. Investors remain unconvinced that panic has disappeared from the markets.

"The aftermath of a major decline usually leaves traders in limbo as they fear another leg lower is around the corner, and stocks are selling off."

He added: “Traders are now pricing in a 100 per cent probability of an interest rate rise from the BoE in August, and the UK home builders like Berkeley and Persimmon are feeling the pinch.”

Berkeley Group Holdings fell 175p to 3,725p, while Persimmon dropped 106p to 2,394p.

In currency markets, the pound had a roller-coaster Thursday, having shot up after the Bank of England signalled that it could raise rates at a faster pace if the economy develops in line with its forecast.

Sterling was up 0.8 per cent against the US dollar at 1.399, and shot up one per cent versus the euro to 1.143 after minutes from the interest rate decision - which saw the Monetary Policy Committee vote 9-0 to keep rates on hold - were released.

However the pound lost steam later in the afternoon, trading just 0.15 per cent higher on the US dollar at 1.390, and 0.4 per cent on the euro at 1.135.

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