FTSE 100 follows Asian stocks lower on property market jitters
European and US stocks tumbled on Monday following news of an energy market crunch in Europe and sharp losses in Asia as investors fled from property stocks.
Investors in the UK were watching for movement in the UK energy market as the government considers offering emergency state-backed loans to companies as wholesale gas prices soar. Prices have jumped 250% since January.
“The FTSE 100 starts a new week in a similar fashion to the way if finished the previous one as the index drops firmly below 7,000 to its lowest level since July, dragged down by the mining sector,” said AJ Bell investment director Russ Mould.
“There’s plenty for the market to fret about and those arguing the markets were looking frothy are seeing some of that froth disappear as a brewing crisis in China, surging gas prices in Europe and concerns about stagflation combine to sink stocks.”
Shares had headed lower in Hong Kong in the previous session with the Hang Seng (^HSI) closing down 3.6%. Jitters reverberated globally as Chinese property firm Evergrande’s (3333.HK) shares plunged more than 17% at one point, closing the day 12.2% lower.
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Commodities were also being sold heavily this morning after China’s Premier Li said at the weekend that China will use “market tools” to stabilise commodity prices.
Copper, aluminium futures, platinum and palladium were all trading lower.
Wall Street’s open was dubbed a “taper tantrum” by market watchers.
The S&P 500 had already dropped below its 50-day moving average on Friday, an important resistance point for the index.
“Stock traders are currently following a buy-the-dip strategy. This was evident in the S&P 500 index’s drop on Wednesday, when Americans pumped $46bn (£33.6bn) into equity funds,” said said Naeem Aslam, chief market analyst at AvaTrade.
“This was the largest investment inflow since March, with a total of $28bn pumped into large-cap companies.”
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Traders are looking to the Federal Reserve’s open market committee meeting later on this week and a volley of other central bank meetings.
“The FOMC meeting, which is scheduled to take place on Wednesday, is the most important event for investors this week,” said Aslam. “Stock market participants will be looking for clues about a possible timeline for the inevitable tapering of bond purchases.”
The Bank of England, Bank of Japan and Swiss National Bank are all also due to meet.
Watch: Does Evergrande Pose Broader Market Threats Outside China?