Stock markets resumed their rollercoaster ride today as more dismal economic figures from China set off renewed turbulence in the FTSE 100 Index wiping £50bn off the value of its constituent companies.
London’s top-flight dived by more than 3 per cent, or around 200 points, during the session - wiping more than £50 billion off the value of its constituent companies.
Fears over the health of China, the world’s second biggest economy, have weighed increasingly on investor sentiment over recent weeks, with the FTSE 100 seeing its worst calendar month for more than three years in August.
It culminated in a “Black Monday” one-day fall of 4.7 per cent last week, though stocks recovered in the last couple of sessions before the bank holiday weekend.
But trading screens turned red again after the three-day break following a report showing Chinese manufacturing at a three-year low last month.
The UK’s manufacturing sector also posted a sluggish performance, with jobs falling for the first time in more than two years - while US figures showed growth in the same sector at its slowest since May 2013.
Hints over the weekend that the timing of interest rate hikes by the US Federal Reserve and the Bank of England would not be put back because of the volatility over China also created jitters.
The FTSE 100 opened sharply lower, along with Germany’s Dax and France’s Cac 40, with the losses intensifying later in the session - while on Wall Street there were also heavy falls.
Experts warned of a volatile week ahead, with thin trading volumes after the bank holiday contributing to the equity swings.
Tony Cross, market analyst at Trustnet Direct, said: “We may have a new trading month under way, but there’s no sign of any improvement in sentiment for equity markets. Traders remain unnerved about the prospects for growth is China.”
Sentiment was also hit by remarks from Bank of England governor Mark Carney over the weekend that China’s economic problems were “unlikely” to derail plans to raise interest rates in the UK - currently expected early next year.
Fed vice chairman Stanley Fischer meanwhile appeared to leave the door open for a US rates hike in September, in separate remarks at the annual get-together of central bank bosses in Jackson Hole, Wyoming.
The Chinese slowdown and rattled investor confidence had prompted expectations that increases might be taken off the agenda in the short term in both the US and UK, where the cost of borrowing has remained at 0.5% for more than six years.
Miners were hardest hit again in the latest FTSE 100 sell-off as the Chinese manufacturing report showed a contraction in the sector, signalling slowing demand for commodities.
Glencore dropped 9%, while Anglo American was 8 per cent lower. Firms with a heavy focus on Asian markets were also sharply in the red, with luxury fashion house Burberry and Standard Chartered down 5 per cent each.
Markets have see-sawed over the past few weeks, regaining some of their poise at the end of last week after the “Black Monday” slump that sent stocks reeling.
Chinese authorities have arrested almost 200 people - including journalists, brokers and regulators - in what they claim is a campaign against those accused of spreading rumours and undermining faith in the country’s stock market.