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  • 11 October 2018
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NYSE tradersImage copyright Getty Images

A sell-off in US stock markets has continued with a second day of steep declines.

Despite early gains, losses on the indexes accelerated later in the day, extending earlier falls in Europe and Asia.

The Dow Jones and S&P 500 both fell more than 1% in mid-afternoon trade, while the Nasdaq slid about 0.5%

The declines come amid concerns about rising interest rates and slowing global growth.

Energy firms led the slump, as oil prices posted steep declines.

Companies in the financial and property sectors – industries sensitive to higher rates and exposed to risk from Hurricane Michael – also took a beating.

Earlier in London, the FTSE 100 share index tumbled 1.9% to close at 7,006 points.

France’s CAC 40 slid 1.9% to 5,106 points, while Germany’s DAX fell 1.5% to 11,539 points.

In Asian trading, the Hang Seng index in Hong Kong had plunged to a 19-month low.

Japan’s Nikkei 225 dropped 3.9% – its steepest daily drop since March. In China, the Shanghai Composite collapsed 5.2% to its lowest level since 2014.

Markets in Asia had followed US stocks, which suffered steep falls on Wednesday.

What’s driving the declines?

US markets have performed better than expected this year, bouncing back after turmoil earlier in the year to set new records over the summer.

But the Federal Reserve is raising interest rates, with the latest hike coming last month, and more increases are likely to come.

The worries over higher rates have been compounded by a trade war between China and the US – which the IMF has warned could harm growth.


Analysis

Kim Gittleson, New York business correspondent, BBC News

For traders who had got used to the seemingly inevitable march of US stock markets ever higher, Wednesday was a bit of a shock.

Here’s just one reason why: the S&P 500 didn’t record a single move up or down of more than 1% during the third quarter of 2018. That hasn’t happened since 1963, according to LPL Financial.

So what led investors to head for the exit?

As ever, it’s almost impossible to pinpoint one reason for the sell-off.

The consensus seems to be a combination of rising interest rates, tariffs and inflation led investors to worry that fourth-quarter earnings season, which begins on Friday, won’t be as record-breaking as prior quarters.

But when it comes to one of those concerns – inflation – investors got to breathe a sigh of relief on Thursday.

Just before US markets opened, the September reading of the consumer price index showed that prices rose by just 0.1% during the month, below expectations.

After the release, the mood on the floor of the New York Stock Exchange was almost instantly lightened, as the lower-than-expected reading tempered concerns that the US Federal Reserve will be forced to increase interest rates at a faster pace than expected.

The question is if calm will once more prevail on Wall Street – or if Wednesday’s dip was a harbinger of a turbulent earnings season to come.


Trump attacks ‘crazy’ Fed

The White House brushed off the declines, arguing that the steep rise in the markets earlier this summer made it ripe for correction.

But US President Donald Trump – who often boasts about US stock market performancealso renewed his attacks on the Federal Reserve for its decision to raise interest rates.

He said higher rates – which make borrowing more expensive – were “far too stringent”, adding: “I think what the Fed is doing is wrong.”

Interest rates in the US remain relatively low by historic standards.

Michael Hewson of CMC Markets said it was “too simplistic to blame the Federal Reserve” for market turmoil.

“There are a number of factors,” he told the BBC. “Obviously, concerns about slowing growth – the IMF downgraded its global growth forecast for the global economy, citing emerging market concerns.”

BBC News – US & Canada

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