Global Stock Markets Wobble but Recover from US Interest Rate Hike

Strategic Insights -

The global stock market recovery from last Friday's US interest rate hike of 0.25 per cent continued yesterday, with Wall Street's Dow Jones index closing 34.9 points up at 3906.32 after a steep fall of 96 points on Friday. However, the FTSE 100 index in London still closed 56.3 points down at 3419, erasing £14.27 billion from share values, with the market's value recovering some of its lost ground. The market's decline took the steam out of the stock market's giddy rise, with dealers cautious about trading over the rest of the week.

Key Takeaways:

  • The US interest rate hike of 0.25 per cent on Friday triggered a global stock market reaction, with the FTSE 100 index in London closing 56.3 points down at 3419.
  • The FTSE 100 index lost £14.27 billion in value, with the Mid-250 index falling 91 points, and the Footsie index falling 94 points to 3382.
  • The Dow Jones index in Wall Street closed 34.9 points up at 3906.32, after a decline of 96 points on Friday.
  • Dealers remained phlegmatic, saying that the market was due for a correction, but there was no panic selling.
  • The interest rate hike may have reversed the flow of US investors' cash outflow from European stock markets, which has been estimated at $90 billion a year.
  • Analysts say Britain is lagging months behind the US in the recovery cycle and there is still room for a further cut in interest rates.

Statistics:

  • The total value of the London stock market has jumped by £206.4 billion in the past year.
  • The total value of all the world's exchanges together has been £1,127.8 billion.
  • £120 billion was wiped off the value of the world's main stock markets since the rate increase on Friday.
  • £22 billion was wiped off share values in London.
  • The Dow Jones index declined by 96 points on Friday.
  • The FTSE 100 index eroded £14.27 billion from share values.
  • The Mid-250 index fell by 91 points.
  • The Footsie index fell by 94 points.

Sources:

  • UK analysts
  • Nick Edwards, UK equity strategist at Yamaichi Securities
  • Comentators
  • Analysts from Yamaichi Securities
  • European stock market traders