FTSE 100 falls to 3-week low as global stock rout resumes

City workers make phone calls outside the London Stock Exchange in Paternoster Square in the City of London at lunchtime October 1, 2008. European policymakers have called on the U.S. Senate to approve a revised rescue plan aimed at tackling the worst financial crisis since the 1930s. REUTERS/Toby Melville (BRITAIN)

The FTSE 100 was down more than 2% in afternoon trade. Photo: REUTERS/Toby Melville

Stock markets fell in Europe on Thursday, as global investors continued to fret about inflation.

The FTSE 100 (^FTSE) was more than 2% lower in noon trade. The index had been yesterday’s frontrunner thanks to better-than-forecast GDP numbers in the UK. London’s benchmark index dropped back below the 7,000 points mark to trade to its worst level in 3 weeks.

Elsewhere, the French CAC (^FCHI) tumbled 1.04% and the DAX (^GDAXI) was 1.35% lower in Germany.

The slump followed a sell-off in the US on Wednesday. Investors were spooked by higher-than-expected inflation data. The jump in US headline CPI to 4.2% was the biggest rise seen since 2008, largely driven by a 10% increase in the prices of used cars and trucks. It was more than double the Federal Reserve’s target.

Stock markets were also hit by a sharp reversal for commodity stocks, which have been rallying in recent weeks. A string of mining companies and oil producers are among the fallers as ongoing inflation angst likewise hits asset prices.

“It seems that many players are simply moving to cash,” Marios Hadjikyriacos of XM said. “Even commodities are trading lower, which implies there’s no place to hide for now.

“Super-loose monetary policy ignited a ‘buy everything’ wave, so perhaps it’s only natural to see a ‘sell everything’ reaction as the days of cheap money slowly draw to an end.”

Brent crude oil (BZ=F) was more than 2% lower at $ 67.68 on Thursday. Prices were pulled lower by the stronger dollar, which is used to price commodities, and the reopening of a crucial supply pipeline in the US.

Watch: FTSE 100 ‘milestone’ as it tops 7,000 mark for first time in more than a year

Read more: Why are investors worried about inflation?

Clothing retailer Burberry led the laggards in London, down 8% on the day, despite sales climbing by almost a third due to strong demand in Asia and America. The strong performance helped limit the fall in annual revenues to 11%, with retail turnover down 9%.

Across the pond, S&P 500 futures (ES=F) were 0.31% lower, Dow futures (YM=F) shed 0.50%, and Nasdaq futures (NQ=F) lost 0.27% a few hours before the bell in New York.

On Wednesday, the S&P 500 (^GSPC) posted its worst day since February, while the Dow Jones (^DJI) saw its worst day since January. US 10-year yields closed at a six-week high, over concerns that the US economy might be at risk of overheating.

“Fears about overheating seem somewhat premature at this time given the disruption wrought by the pandemic and the price disruptions of the past 12 months,” Michael Hewson of CMC Markets said.

“While concerns about inflation are continuing to dominate investor concerns, there is unlikely to be any respite with the latest US PPI [producer price index] numbers for April due to be released this afternoon.”

Connor Campbell of SpreadEx said: “Extra scrutiny may be paid to this afternoon’s weekly jobless claims reading following last Friday’s non-farm disappointment. Analysts are expecting another week-on-week drop, from 498,000 to 487,000 – however, these estimates are notoriously inaccurate, so there could be a lot of movement around that number.”

Asian stocks followed Wall Street’s on Thursday, with market benchmarks in Shanghai, Tokyo, Hong Kong and Southeast Asia retreating.

The Shanghai Composite index (000001.SS) fell 0.96% while the Nikkei 225 in Tokyo (^N225) tumbled 2.49%. The Hang Seng in Hong Kong (^HSI) lost 1.39%.

Watch: What is inflation and why is it important?