The FTSE 100 has lost close to 3 per cent today in a global bloodbath after investors were spooked by the US Federal Reserve and China.
Last night, Fed chairman Ben Bernanke said the central bank may slow its $85bn-a-month bond-buying programme later in 2013 and completely withdraw the scheme in 2014.
Meanwhile, data from HSBC suggested Chinese manufacturing activity dropped to a nine-month low in June – adding to concerns that the world’s second largest economy is heading towards a so-called hard landing.
At close, the FTSE 100 was down 189.31 points, or close to 2.98 per cent, at 6,159.51. Polymetal International, Fresnillo, Aberdeen Asset Management, Randgold Resources and Antofagasta showed the biggest losses.
The Euro Stoxx 50 was down 89.80 points, the German Dax 30 lost 268.60 and the French Cac 40 shed 140.41. In the US, the S&P 500 and the Dow Jones both shed more than 1.5 per cent in the first hour of trading, while the Nasdaq was down 1.4 per cent.
The Fed will maintain its bond-buying programme at its current $85bn a month for now but Bernanke said it would be “appropriate to moderate the monthly pace of purchases later this year” if the US economy continues to grow as expected.
Markets were hit by a global sell-off late last month after the chairman first suggested the central bank could start to taper QE “in the next few meetings”.
The recent Bank of America Merrill Lynch Fund Manager Survey shows global asset allocators regard a so-called hard landing in China as their top tail risk, with 32 per cent of investors citing this and commodity collapse as their biggest fear.