UK stocks clawed back their losses after a turbulent week in the City amid fears of a recession in the US.
Investors’ nervousness about a slowdown in the world’s largest economy kicked off the chaos, which was accelerated by an interest rate hike in Japan and concerns about overvalued tech stocks.
But the FTSE 100 managed to recoup its losses, ending yesterday up 0.3 per cent, or 23.13 points, at 8168.1.
London’s blue-chip index was up 1.75 per cent, or 140.36 points, over the last five days.
Key economic data set to be unveiled next week – including UK and US inflation numbers – could see further volatility in global markets. Official figures that showed American employers added fewer jobs in July than expected kicked off the week’s stock market rout.
Bouncing back: The FTSE 100 managed to recoup its losses, ending up 0.3 per cent, or 23.13 points, at 8168.1
Investors panicked over data that hinted at an economic slowdown in the US, which left the Federal Reserve, the country’s central bank, facing accusations that it had left it too late to cut the interest rate.
Alongside fears over the health of the US economy, a surprise rate hike in Japan last week compounded the market turmoil.
The shock Bank of Japan increase saw traders who had borrowed in yen while interest rates were low scramble to offload their investments and repay their debts. The Japanese stock market suffered its biggest one day drop since 1987 on Monday. But Tokyo’s benchmark Nikkei 225 index closed 0.56 per cent up on Friday, and it was down just 0.47 per cent on the week.
Wall Street suffered after mega cap tech stocks were hit hard in the rout amid fears they are overvalued.
But they rallied on Thursday after fresh labour market data showed that jobless claims last week fell more than expected.
Overall, in early trading New York’s major indexes parred their losses, with the S&P 500 gaining 0.7 per cent, the Dow Jones Industrial Average rising 0.4 per cent, and the tech-focused Nasdaq jumping 0.7 per cent. Investors await next week’s readings on US consumer prices and retail sales for July, which could provide fresh evidence on the chances of a soft landing for the US economy.
Fed policymakers said on Thursday they were confident that inflation was cooling enough to allow interest rate cuts to go ahead and will take their cues on the size and timing of them from the economic data.
‘Investors are looking forward to a chunky rate cut at the Fed’s next meeting in mid-September,’ David Morrison, senior market analyst at broker Trade Nation, said. ‘The question is whether equities can manage to push higher in the interim, or if disappointing data on inflation and labour upset the journey.’
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