Equities were battered, gold prices fell, and the dollar was largely on the up as the expectation of more interest rate hikes at home and across the Atlantic meant bond yields spiked.
Gilt yields soared past their UK mini-budget highs, while US Treasuries were having a similarly dramatic session.
For equities, it was a sea of red. From housebuilders, to retailers and lenders to leisure, stocks suffered deep sell-offs.
The FTSE 100 index dropped 161.60 points, or 2.2%, to 7,280.50. It was the blue-chip index’s chunkiest daily points fall since late-March.
The FTSE 250 ended down 476.87 points, or 2.6%, at 17,916.46, and the AIM All-Share closed down 11.51 points, or 1.5%, at 740.86.
The Cboe UK 100 closed down 2.3% at 725.49, the Cboe UK 250 closed down 2.2% at 15,743.73, and the Cboe Small Companies fell 1.1% to 13,555.51.
In European equities on Thursday, the CAC 40 in Paris crashed 3.1%, while the DAX 40 in Frankfurt plunged 2.6%.
Fed officials signalled they plan to resume interest rate rises, believing more tightening is required to tame inflation in the world’s largest economy.
‘Almost all participants noted that in their economic projections that they judged that additional increases in the target federal funds rate during 2023 would be appropriate,’ minutes from the June meeting of the Federal Open Market Committee showed on Wednesday.
What’s more, a member of the Fed’s rate-setting committee said Thursday that she supported additional monetary tightening.
‘At this point, it is important for the FOMC to follow through on the signal we sent in June,’ Dallas Fed president Lorie Logan told a conference in New York.
‘To have confidence that inflation will return to target on an appropriate timetable, we need to see more than some continued very modest rebalancing,’ she said.
However, she said her backing for the FOMC’s prediction of two additional hikes was contingent on there being no ‘significant unexpected events’.
Logan spoke on the day numbers from payroll processor ADP showed US private sector employment grew by almost half a million jobs.
Employment grew by 497,000 in June, rising from 278,000 in May.
The ADP data is a precursor to Friday’s official jobs report. Numbers are expected to show that employment growth slowed to 225,000 last month, from 339,000 in May.
The nonfarm payrolls data is released 1330 BST on Friday. Elsewhere, the economic calendar has German industrial production data and the latest UK Halifax house price index at 0700 BST. Irish gross domestic product data is reported at 1100 BST.
The pound was quoted at $1.2690 at the time of the London equities close on Thursday, down from $1.2718 at the close on Wednesday. The euro stood at $1.0858, lower against $1.0876. Against the yen, the dollar was trading at JP¥144.23, lower compared to JP¥144.53.
The US data was released amid a backdrop of widening Treasury yields, which lowered stock market appetite. The yield on the US 10-year widened beyond 4.07% at the time of the European equities close, from around 3.96% late Wednesday.
Equities in New York, conversely, struggled. The Dow Jones Industrial Average tumbled 1.4%, the S&P 500 lost 1.3% and the tech-heavy Nasdaq Composite plunged 1.5%.
Gold was quoted at $1,909.01 an ounce late Thursday, also suffering as yields widened, lower against $1,924.40 on Wednesday. Oil prices also fell. Brent oil was quoted at $75.23 a barrel, down from $76.54.
It was not just the US bond market that was in focus. The UK government’s borrowing costs rose Thursday, with bond yields hitting 15-year peaks on expectations of more central bank interest rate hikes to fight inflation.
The yield on five-year bonds rose to 4.95%, reaching a level last seen during the global financial crisis in July 2008.
And the yield on 10-year bonds reached a similar pinnacle at 4.69%.
Both highs were above levels reached late last year during a period of UK economic turmoil that ended Liz Truss’ short spell as prime minister.
Markets ramped up their expectations for further Bank of England rate hikes. The central bank is now expected to lift its main lending rate to a peak of 6.5% in March, as it seeks to dampen stubbornly high inflation. Prior expectations had been for a peak of 6.25%.
As Bank of England tightening expectations picked up, shares in those exposed to the UK mortgage market struggled. Housebuilder Persimmon fell 4.4% and lender NatWest dropped 2.4%. The pain was also felt for those whose success requires a resilient consumer.
Athleisure retailer JD Sports fell 4.6%, fast fashion firm Asos dropped 7.4% and Wagamama owner Restaurant Group slipped 5.9%.
Currys dropped 10%. The electronics retailer reported a ‘very mixed year’, and paid no final dividend.
In the financial year ended April 29, its annual adjusted pretax profit came in at the top end of guidance, but on a statutory basis, it swung to a pretax loss of £450 million from £126 million profit. Revenue fell 6.2% to £9.51 billion from £10.14 billion.
Currys said it is planning to cut capital expenditure 25%, and expects net exceptional costs of around £50 million, due to additional property costs and restructuring. Trading at the start of the year has been consistent with its expectations, the company said.
It was a dire day for most large- and mid-cap stocks, but further down the echelons of the London Stock Exchange, Hunting surged 22%.
The energy services firm said its trading in the first half of the year beat expectations, driven primarily by strength across international markets.
As a result, the company said both revenue and operating profit are set to be ahead of its targets set at the beginning of the year.
Hunting increased guidance for earnings before interest, tax, depreciation and amortisation to between $96 million to $100 million, expecting $48 to $50 million in the first half.
Friday’s local corporate has a trading statement from housebuilder and land investor MJ Gleeson.
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