US stocks hint at end to global sell-off

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US stocks have opened lower before clawing back some ground, a day after suffering their worst losses in eight months, while European shares remain subdued.

The Dow Jones index shed more than 130 points, or 0.5%, to 25,466, while the S&P 500 and Nasdaq also fell, but all three later entered positive territory.

In London, the UK’s FTSE 100 share index was down 1.2% at 7,063.

Earlier, markets in Asia had plunged to a 19-month low.

On Thursday, US President Donald Trump renewed his attacks on the Federal Reserve, which has been raising interest rates.

He told the Fox News channel the Fed’s policy was “too aggressive” and that it was “making a big mistake”.

On Wednesday, he said the Fed had “gone crazy”, prompting a response from International Monetary Fund head Christine Lagarde, who said she “would not associate” Fed chair Jerome Powell “with craziness”.

In Paris, the Cac 40 share index was down 0.8% at 5,163 points, while in Frankfurt, the Dax index fell 0.3% to 11,673.

Markets in Asia had followed US stocks, which slumped on Wednesday.

Japan’s benchmark Nikkei 225 dropped 3.9%, its steepest daily drop since March. In China, the Shanghai Composite fell 5.2% to its lowest level since 2014.


Kim Gittleson, New York business correspondent

For traders who had got used to the seemingly inevitable march of US stock markets ever higher, Wednesday was a bit of a shock.

Here’s just one reason why: the S&P 500 didn’t record a single move up or down of more than 1% during the third quarter of 2018. That hasn’t happened since 1963, according to LPL Financial.

So what led investors to head for the exit?

As ever, it’s almost impossible to pinpoint one reason for the sell-off.

The consensus seems to be a combination of rising interest rates, tariffs and inflation led investors to worry that fourth-quarter earnings season, which begins on Friday, won’t be as record-breaking as prior quarters.

But when it comes to one of those concerns – inflation – investors got to breathe a sigh of relief on Thursday.

Just before US markets opened, the September reading of the consumer price index showed that prices rose by just 0.1% during the month, below expectations.

After the release, the mood on the floor of the New York Stock Exchange was almost instantly lightened, as the lower-than-expected reading tempered concerns that the US Federal Reserve will be forced to increase interest rates at a faster pace than expected.

The question is if calm will once more prevail on Wall Street – or if Wednesday’s dip was a harbinger of a turbulent earnings season to come.

Trump attacks ‘crazy’ Fed

US markets have done better than expected this year, bouncing back after turmoil early in the year to set new records over the summer.

But the Federal Reserve is raising interest rates, with the latest hike coming last month, and more increases are likely to come.

The Fed last month abandoned its description of its policy as “accommodative”, reflecting a view that the economy is strong enough not to need the kind of stimulus it received in the after-math of the financial crisis.

The prospect of dwindling US stimulus has been compounded by a trade war between the world’s two largest economy – which the IMF has warned could harm growth.

US President Donald Trump has been particularly critical of the Fed’s rate rises, breaking with tradition in the US where presidents are expected to respect central bank independence.

“The Fed is making a mistake,” he told reporters on Wednesday. “I think the Fed has gone crazy.”

Correction ‘well-overdue’

However, analyst Michael Hewson of CMC Markets said it was “too simplistic just to blame the Federal Reserve” for market turmoil.

“There are a number of factors,” he told the BBC. “Obviously, concerns about slowing growth – the IMF downgraded its global growth forecast for the global economy, citing emerging market concerns,” he said.

Mr Hewson added that trade tensions between China and the US had weighed on Asian markets for most of this year, while trade tensions between the US and the EU had hit European markets. Concerns about the political situation in Italy were also adding to market nervousness.

“It’s a well-overdue correction, driven by US markets, which have out-performed for most of the past two to three years,” he added.

Simon French, chief economist at Panmure Gordon, told the BBC that what was “really quite interesting is the speed with which the sell-off is taking place”, adding that there has been a pattern over the past few years of markets hitting new highs followed by sharp drops.

He added: “When you’ve got the president of the US saying some quite unpleasant things about the Federal Reserve… you don’t necessarily expect it in the US.”

“That’s made investors say ‘Given those gains, we’ll bank some of them, [and] take money off the table’.”

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