The FTSE 100 Index slumped by another 2% today as fears over the global economy triggered another bleak session for volatile stock markets.
London’s blue-chip index lost £46 billion in value yesterday and is now at its lowest level since June 2013 following today’s latest sharp sell-off.
There were initially hopes for a steadier session following an early rise of 70 points but the gains were short-lived as investors eyed the prospect of a weak start to trading on Wall Street.
The correction for the FTSE 100 Index since its near record high of 6900 at the start of last month now stands at 12% to just above 6000. This includes yesterday’s heaviest one-day fall in 16 months with a decline of 2.8%.
The current slump has come in the wake of poor US economic data and political uncertainty in Greece, prompting worries about its continuing adherence to an unpopular bailout austerity plan.
It added to growing anxiety in recent weeks that the eurozone may be heading back into recession with its largest economy, Germany, reporting a fall in exports and slashing growth forecasts.
Michael Hewson, chief market analyst at CMC Markets, said the end of monetary stimulus by the US Federal Reserve had provided a reality check for markets.
He said: “As the monetary morphine has started to wear off the patient has come to realise that a lot of the old problems still remain, and yesterday’s poor US data helped trigger a rather extreme reaction in not only the stock markets but bond markets too, as complacent investors rushed to hedge themselves.
“In essence, investors are asking the question with respect to the recent recovery about whether this is as good as it gets, which rather explains the slump in the oil price, bond yields and stock markets.”
The oil price has continued to sag on fears over weakening demand, with Brent crude heading towards $83 a barrel.