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Markets in freefall: FTSE 100 down 3%

21st century gains lost as global stock markets crash

London Stock ExchangeThe FTSE 100 plummeted by 217.79 points or 3.15% to 6704.05 as investors took fright at growing US China tensions, Brexit uncertainty and slowing global growth. 

It was the blue chip index’s biggest one day fall since the Brexit vote in 2016.

The slump wiped out the entire 21st century gain, excluding dividends. It closed at 6930 at the end of 1999.

Markets also fell in mainland Europe and across Asia because of concerns over global economic growth, rising interest rates and the US/China trade war. The FTSE 100’s closing peak this year was 7,877 on 22 May.

US stocks tumbled, erasing this year’s slim gains in the S&P 500 and the Dow Jones Industrial Average. In early trade the Dow Jones was down 700 points (2.67%).

From midday stocks began paring their losses and the tech-heavy Nasdaq ended in positive territory.

The Dow Jones finished 79.4 points, or 0.32% lower, the S&P 500 lost 4.11 points, or 0.15% while the Nasdaq Composite added 29.83 points, or 0.42%. Asian markets opened late Thursday with signs of a tentative recovery. Japan’s Nikkei added 0.2% and Chinese blue chips up 0.3%.

Russ Mould, investment director at AJ Bell, said markets were unsettled after Canadian authorities arrested Meng Wenzhou, the finance chief of Chinese tech firm Huawei, who now faces extradition to the US.

“Investors may fear this will stir up tensions between China and the US,” he said.

Huawei is the crown jewel of Chinese tech and Ms Meng is held in high regard. The US has been investigating Huawei for possible violations of US sanctions on Iran.

This arrest could have broader ramifications by materially damaging the relationship between the US and China at possibly one of the most sensitive times between the two countries.

Only two companies rose on the FTSE 100 – both miners. Randgold Resources rose 3% to £65.76 while Fresnillo added 1.4% to 785.8p.

“All these are considered to be defensive stocks, offering goods and services people would buy regardless of economic conditions,” said Mould. “Diageo is perhaps an exception as an alcohol seller yet investors often turn to large, robust business in times of strife. That may also explain why Unilever and Compass declined much less than the broader market.

“The fallers were led by mining stocks which are always sensitive to any fears over the global economy and China.

“Betting companies GVC and Paddy Power Betfair were also down on news that gambling firms had agreed to stop advertising during live sport broadcasts. Investors are clearly betting that earnings will be hit.”

At lunchtime Paddy Power Betfair was down more than 6%, GVC Holdings (the owner of Ladbrokes) by more than 4%, 888 down 5% and William Hill down 6%.

Mould echoed Tom Stevenson at Fidelity by saying Ted Baker‘s problems reveal the risks of having one person so central to the fortunes of a business.

“Mr Kelvin is the creative driving force behind Ted Baker and if he is forced to step down, investors might fear a similar fate to Superdry which has struggled badly since the departure of its own founder Julian Dunkerton,” says Mould.

Oil cut doubt

Oil prices are heading back down on reports that Saudi Arabia’s oil minister Khalid al-Falih said OPEC is not confident of reaching an agreement with Russia to cut output during a meeting with non-OPEC countries on Friday.

Brent crude fell back below $60 a barrel, down 3.93% at $59.14 and West Texas Intermediate is off 3.65% at $50.96.

Members of the Opec group of oil producers earlier reached a “tentative” agreement to cut output, without specifying by how much.

The Saudi energy minister said that may be made clear on Friday evening.

Tesco trial collapses

The trial has collapsed of two former Tesco directors accused of committing a £250m fraud after the judge dismissed their case due to lack of evidence.

Christopher Bush, 52, from High Wycombe, and John Scouler, 50, from St Albans, were cleared on charges of fraud and false accounting.

They were accused of manipulating figures that resulted in Tesco’s profits being massively overstated. In August 2014, Tesco said it expected half-year profits to be about £1.1bn. However, weeks later, it said profits had been overstated by about £250m.

The defendants had been on trial for eight weeks at Southwark Crown Court.

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