European markets slump after sombre Wall Street and Asia session

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In London, the FTSE 100 fell 0.8% after opening. Photo: Ray Tang/Xinhua via Getty

European stock markets slumped into the red on Wednesday, adding to Tuesday’s decline, after the return of US markets from a three-day weekend.

In London, the FTSE 100 (^FTSE) was 0.5% down in noon trade, covering slightly from a deeper dip earlier in the day, while the French CAC (^FCHI) tumbled 0.4% and the DAX (^GDAXI) was 0.7% lower in Germany.

“Economic growth fears have cast a black cloud over global markets, leading to some hefty share price declines across Europe on Wednesday,” Russ Mould, investment director at AJ Bell, said.

“Investors on the whole have enjoyed a fairly decent run this year, but now attention is turning from the post-lockdown spending splurge to how corporate earnings might fare next year.

There is a sense that some of the market forecasts have been too optimistic and so there could be some share price disappointment unless we see GDP figures pick up and the COVID Delta variant stops causing so much trouble.”

Despite the falls, the FTSE 100 remains comfortably ahead year to date, by 9.8%, while the FTSE 250 is up 16.9%.

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Across the pond, S&P 500 futures (ES=F), Dow futures (YM=F) were both flat, and Nasdaq futures (NQ=F) were 0.1% down a few hours before the opening bell in New York.

Wall Street closed mostly lower on Tuesday as traders returned from the Labour Day holiday. The fallout from Friday’s huge miss on US jobs growth continued to reverberate around global markets.

“Various downgrades to US growth prospects, with Goldman Sachs downgrading its economic outlook for the US economy appears to have prompted a reassessment of where markets might go next, in the face of a possible paring back of stimulus measures in the coming months,” Michael Hewson of CMC Markets said.

“Against these concerns of a weaker outlook, the August jobs report has also served to crystallise concerns that after a decent summer, the economic recovery is rolling over, at around the same time central banks are starting to look at reducing some of their emergency stimulus measures.”

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Stocks were mixed in Asia on Wednesday after strong trade data from China on Tuesday failed to counter the dampening impact of a weak US jobs report last week.

Jeffrey Halley, a senior market analyst at trading platform Oanda, said: “The uninspiring Wall Street performance and falling commodity prices are weighing on Asian markets.”

In Japan, the Nikkei (^N225) climbed 0.9% while other key markets lagged. The Hang Seng (^HSI) ended the day 0.2% down, despite a positive start, and the Shanghai Composite (000001.SS) closed flat.

It came as Japan’s growth for months from April to June was revised up to an annual pace of 1.9% from a preliminary estimate of 1.3%.

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