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Stocks continued to slide on Thursday following Wall Street’s biggest one-day drop since April, while sterling touched a five-week low after the Bank of England raised interest rates by a quarter of a percentage point.
In Europe, the region-wide Stoxx Europe 600 was down 0.6 per cent, on course for a third successive session of declines. The index has lost nearly 3 per cent this week as investors respond to some weak corporate earnings and economic data.
France’s Cac 40 lost 0.6 per cent and Germany’s Dax gave up 0.7 per cent on Thursday. London’s FTSE 100 was down 0.7 per cent immediately after the BoE raised its benchmark rate to 5.25 per cent, as expected by the majority of investors. Sterling briefly touched its weakest level against the dollar since late June of $1.2623, before paring losses.
Falling inflation in the UK allowed the central bank to slow the pace of its tightening campaign, after it surprised markets with a larger half-point increase at the previous policy meeting in June.
Yet unlike the US Federal Reserve and the European Central Bank, which had also recently raised rates by a quarter-point, the BoE did not signal that its tightening campaign was approaching the end, as prices in the UK continued to grow at a faster pace than in other large economies.
The latest stock market losses follow Wednesday’s global sell-off, which dragged the S&P 500 1.4 per cent lower, after Fitch’s surprise downgrade of the US sovereign credit rating and the announcement of an increase in Treasury issuance, which pushed up global bond yields.
Futures contracts tracking Wall Street’s benchmark S&P 500 slipped 0.3 per cent, while those tracking the tech-focused Nasdaq 100 fell 0.4 per cent ahead of the New York open. Apple and Amazon are due to report second-quarter earnings after the closing bell.
In Asia, Hong Kong’s Hang Seng index fell 0.5 per cent, while South Korea’s Kospi lost 0.4 per cent and Japan’s Topix dropped 1.5 per cent.
China’s benchmark CSI 300 was the only outlier in the region, adding 0.9 per cent after fresh data showed that the country’s services activity expanded faster than expected in July. The Caixin services purchasing managers’ index rose to 54.1, well above the 52.4 forecast.
