Global stock markets extended their sell-off yesterday as disappointing US jobs figures added to reignited concerns about weak growth.
In London, the FTSE 100 down 1.2% to 6,112.02 points; Frankfurt - DAX 30 down 0.99% at 9,828.25 points and Paris - CAC 40 down 1.1% at 4,324.23 points at the close yesterday.
After a run of gains for equities, traders have been spooked by a string of disappointing data from China to Europe and the US that has led them to question whether hopes of a nascent recovery were overdone.
However the dollar has continued to recover from eight-month lows versus the euro on hints that the US Federal Reserve may still hike US interest rates in June, analysts said.
While this makes the US currency a more attractive investment, higher borrowing costs can weigh on economic growth.
The euro hit $1.1616 on Tuesday, the highest point since late August but was standing at $1.1495 in Wednesday deals.
“The US dollar index made a new low for the year yesterday, briefly recovering on the back of comments from the Fed’s Dennis Lockhart that a hike in interest rates at the June... meeting is still on the cards,” said Neil MacKinnon, economist at financial group VTB Capital.
Comments from Federal Reserve officials suggesting the US central bank could hike interest rates as soon as next month also provided support to the greenback against the yen after plummeting over the past month.
Across the Atlantic meanwhile, the European Union on Tuesday cut its eurozone growth forecasts for this year, warning that global risks including the slowdown in China and the danger of Britain leaving the EU were having a damaging effect.
The news was the latest of a flurry of data highlighting weaknesses in the global economy, including a shrinkage or slowdown of manufacturing activity in China, Britain and the US.
“The market is extremely morose today in reaction to macro-economic data that are not as good as expected,” said Michael Jacoby, head of continental European trading at Oddo Securities.
London’s FTSE led Europe’s main bourses into negative territory Wednesday, closing 1.2% lower, with Paris’ CAC and the DAX in Frankfurt following closely behind.
Jasper Lawler, an analyst at CMC Markets, said the FTSE 100 had hit two-week lows amid concerns that slowing global growth could derail a nascent return in investor confidence.
“Stock markets have been falling in the past few days amid mixed corporate earnings but a return of US dollar strength in the past two days, if sustained, could add to downside risks,” he cautioned.
Wall Street stocks slid as disappointing private-sector hiring figures for April added to worries the US economy is slowing.
Sheraz Mian, of Zacks Investment Research, said the jobs data was “the first weak showing on the labour market front, which, if confirmed by the Friday government jobs report, will represent a notable deterioration in the US economic outlook”.
The mining sector, already under pressure from weak demand growth for metals, took another knock with BHP Billiton’s share price plunging on news that Brazilian prosecutors had slapped it with a $43bn (€37bn) lawsuit over November’s deadly Samarco dam disaster.
BHP stock lost more than 9.0% in Sydney, while its London-listed shares were down 5.8% at 824.80 pence on London’s FTSE 100.
Sydney’s equity market meanwhile closed down 1.5% yesterday. Across Asia, Hong Kong lost 0.7% and Seoul shed 0.5%.
A logo is displayed on an interactive sculpture in the main atrium of the London Stock Exchange headquarters. The FTSE 100 closed down 1.2% to 6,112.02 points yesterday.
