The sell-off in global stock markets continued today as fears over the health of the eurozone economy left the FTSE 100 Index at a one-year low.
The London market’s latest decline of around 0.5 per cent followed a dire session on Wall Street last night, with the Dow Jones Industrial Average producing its worst performance of the year with a fall of nearly two per cent.
Worries about the global economy, particularly in Europe and Asia, have been accompanied by a wave of selling in energy stocks due to a sharp fall in the price of oil.
Fears that Europe’s largest economy, Germany, may fall into recession were fuelled yesterday when a report showed its exports sank 5.8 per cent in August, the biggest monthly drop in five years.
Earlier this week , the International Monetary Fund downgraded its growth forecasts for the three largest eurozone economies - Germany, France and Italy - prompting Chancellor George Osborne to warn that the UK economy was facing a “critical moment”.
He told the BBC yesterday: “The eurozone risks slipping back into crisis. Britain cannot be immune from that. It’s already having an impact on our manufacturing and our exports.”
The FTSE 100 Index has retreated from near record territory less than a month ago to its lowest level since October last year.
Richard Hunter, head of equities at Hargreaves Lansdown stockbrokers, said: “Concerns around the lack of global economic growth are spooking investors.
“In particular, the situation in China remains unclear, whilst within the eurozone, even the supposed powerhouse of Germany could be staring into another recession.
“The cocktail of concerns is completed by ongoing geopolitical worries, the possibility of widespread deflation and a commodity glut.”
Mr Hunter said third quarter results due next week could provide some relief but companies will need to comfortably exceed expectations to remove some of the uncertainty which is currently hanging over markets.