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Investors move back into market

London guarded as equities recover from slump

London Stock Exchange

Markets have been on a rollercoaster


Thur open: London stocks edged higher suggesting recent fluctuations are more short-term gyrations than a sustained market correction.

The FTSE 100 closed 1.94%, or 138.21 points, higher at 7,279.61. The index was 0.45% or 32.75 points lower at today’s opening.

The Dow Jones Industrial Average rose 380 points at one stage, but ended the day slightly lower at 24,893 points, a decline of 0.1%. The S&P 500 ended down 0.50% and the Nasdaq Composite lost 0.9%.

Japan’s Nikkei gained 0.4% overnight, though it is still down more than 6% so far this week.

The recovery in shares confounded those predicting a period of falling prices following the long bull run across global markets which came to an abrupt halt on Friday amid fears of rising interest rates.

Andrew Milligan, head of global strategy at Aberdeen Standard Investments, said in a note it was no surprise to see a market correction after a long period of low volatility

“This (low volatility) was aided by central bank QE policies continuing to inject sizeable amounts of liquidity into a wide range of financial assets, as well as the steady state of the global economy continuing to reassure investors,” he said.

“All in all, the probability of a correction has increased over time, which creates a good opportunity for active investors, as long as long-term drivers remain positive.”

Oil prices fell after US data showed a build in inventories and record high crude production, raising worries of more selling. Brent crude futures tumbled to a six-week low of $65.16.

 

The Bank of England will announce economic forecasts on Thursday and meet to discuss the interest rate.

Background

During 2017 the Dow Jones soared 25%, rapidly taking it past 25,000 and 26,000 points on the back of positive sentiment around the US economy.

But investors hit the buffers on Friday as prospects of monetary tightening appeared more likely.

Monday’s 1,175-point drop in the Dow Jones Industrials was the biggest fall on record in terms of points, but not close in percentage terms.

The US index lost ‘just’ 508 points on Black Monday in October 1987 but that equated to a 23% drop. And a mere 38-point plunge on Black Monday in 1929 meant a 13% drop, as part of a crushing string of downward movements which comprised the Crash of that year.

The US has seen 4 days already in 2018 when the S&P 500 index moved up or down by more than 1% during a trading day. It managed that just eight times in 2017 but it managed it 137 times in 2008, when the market last crashed – that is more than one such change for every two days.



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