Yahoo Finance FTSE 100 and European stocks close in the red as summer lull sets in
European equities closed in the red Tuesday as traders' worries over rate hikes, recession and a spike in energy prices knocked the summer stock-market rally.
In London, the FTSE 100 (^FTSE) fell 0.7% after the closing bell, the CAC (^FCHI) was 0.4% lower in Paris, and Frankfurt's DAX (^GDAXI) dipped 0.3%.
"The FTSE 100 has found itself at the bottom of the pack today, reversing the common thread that has been evident throughout the past week," Joshua Mahony, senior market analyst at online trading platform IG said. "While fear of economic collapse has been centred upon Europe, this afternoon has seen the US economy in the limelight as services activity crashed to the lowest level since May 2020."
It comes as natural gas prices skyrocketed, adding to market angst after Gazprom (GAZP.ME) said it will be closing Nord Stream One for "maintenance" for three days at the end of the month, raising fears that this could happen on a more regular basis as the winter nears.
"It matters little whether Russia decides to cut off flows completely given the market is behaving as if they will, prompting consistent revisions higher of where inflation is likely to be this time next year," said Michael Hewson, chief market analyst at CMC Markets.
"We’ll get further insight into the damage that has not only been done by high energy prices, but also the extreme weather we saw in Europe with the low river water levels, as well as the various forest fires."
Read more: Exchange rates: Pound at lowest level against dollar since March 2020
Across the Atlantic, Wall Street indices traded in mixed territory after dropping more than 2% in the biggest decline in two months ahead of the Jackson Hole Symposium.
Federal Reserve chair Jerome Powell is expected to reiterate the FOMC's focus on pushing inflation back towards 2% on Friday.
The S&P 500 (^GSPC) lost ground to trade flat after gaining 0.3% at the open, the tech-heavy Nasdaq (^IXIC) was up 0.2% after adding 0.6%, while the Dow Jones (^DJI) declined 0.4% at London's close.
Richard Hunter, head of markets at Interactive Investor, said: "Global markets slumped amid a toxic cocktail of fears around inflation, possible recession and further shortages of energy supplies.
"US markets were in the firing line, with some of the recent strength evaporating ahead of the Jackson Hole symposium later in the week.
"There is perhaps a growing realisation that the Federal Reserve will remain unmoved by recent data which suggested that inflation could be peaking and maintain its aggressive policy.
"Investors unsettled by a new round of tightening are increasingly returning to the conclusion that the next Fed hike in September will be another rise of 0.75%, with the consensus having been for a lighter 0.5% over recent sessions."
Read more: Oil prices slump on stronger dollar and global recession fears
Asian stocks were mixed overnight with Japan leading the losses after PMI figures showed factory activity slowed to a 19-month low in August as the costs of raw material and energy soared.
Meanwhile, unease over China's economy continued to weigh as a lending rates cut and talk of a fresh round of official loans to property developers underlined stresses in the industry.
The benchmark Nikkei (^N225) was down 1.2% in Tokyo, while the Hang Seng (^HSI) slipped 1.1% in Hong Kong and the Shanghai Composite (000001.SS) drifted 0.1% lower.
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