Interest fears wipe £27bn off FTSE 100
More than £27bn has been lost off the value of London's blue-chip stocks as fears over interest rate hikes ripped through global markets.
The FTSE 100 Index plunged 108.45 points to 7,334.98, as traders began pricing in the prospect of central banks enforcing tighter monetary policy in the United States, Europe and Asia.
European markets were enduring a rough ride yesterday, as the Cac 40 in France dropped 1.5% and Germany's DAX lost 0.8%.
However, US markets were fairing marginally better across the board, with the Dow Jones Industrial Average and the S&P 500 sinking 0.8% and 0.7% respectively at the time of the London market's close.
David Madden, market analyst at CMC Markets, said: "European markets are firmly in the red as the global sell-off in stocks has taken hold.
"Ever since the US posted strong average earnings last Friday, traders have been rattled by the prospect of tighter monetary policy around the world.
"Equity traders were enjoying a bullish run recently, and the jolt from the major decline in the US last Friday has triggered a worldwide round of profit taking."
On the currency markets, sterling dropped 0.7% against the US dollar at 1.40, as the stronger greenback and lacklustre UK economic data cooked up a bruising session for the pound. The latest update on Britain's powerhouse services sector was grim reading, pointing to a slowdown in UK gross domestic product (GDP) to 0.3% in the first quarter after disappointing performances in manufacturing and construction.
Activity in the services industry slipped to a 16-month low in January, as businesses were hit with weak growth in new work.
The IHS Markit/CIPS UK Services purchasing managers' index (PMI) showed a reading of 53.0 in January, down from 54.2 in December and lower than economist expectations of a figure of 54.1.
Against the euro, sterling was 0.5% off at 1.13. Oil was also drifting lower in response to rising US crude outputs. Brent crude was down 0.7% to US$67.73 a barrel.
Elsewhere in UK stocks, the publisher of the Daily Mirror newspaper took a tumble after revealing that it remains locked in discussions over a deal to buy the Daily Express and Daily Star.
Shares in Trinity Mirror were down 0.7p to 67.4p in London.