Stocks in London plunged on Monday, with hotter-than-expected US inflation and renewed lockdown measures in China lifting fears over the fate of two of the world's biggest economies.
The FTSE 100 index closed down 111.71 points, or 1.5%, at 7,205.81. The FTSE 250 ended down 489.95 points, or 2.5%, at 19,183.37, and the AIM All-Share closed down 26.86 points, or 2.8%, at 924.06.
The Cboe UK 100 ended down 1.5% at 718.61, the Cboe UK 250 closed down 3.0% at 16,879.56, and the Cboe Small Companies ended down 2.1% at 14,257.06.
In European equities, the CAC 40 stock index in Paris ended down 2.7%, while the DAX 40 in Frankfurt ended down 2.4%.
Stocks in New York were firmly in the red at the London equities close. The DJIA was down 3.7%, the S&P 500 index down 2.6% and the tech-heavy Nasdaq Composite down 4.5%. The S&P 500 sank into a 'bear market' - defined as a 20% drop from its most recent high.
US equities have been on shaky ground throughout 2022, as central banks shift abruptly from easy money policies to aggressive tightening through phased-out stimulus programmes and higher interest rates.
Friday's US hotter-than-expected US inflation report exacerbated this dynamic, undermining hopes that pricing pressures have peaked, or are peaking, and raising the possibility for even more aggressive rate hikes from the Federal Reserve.
In the FTSE 100, precious metals miner Fresnillo ended the top gainer in the FTSE 100, up 5.3%, the the risk-off environment.
‘The mood out there is pretty grim, with the relief rally seen in late May starting to feel like a distant memory. You know things are bad when the best performer among the UK's top stocks is precious metal producer Fresnillo as investors reach for traditional safe havens,’ said AJ Bell investment director Russ Mould.
Gold stood at $1,826.77 an ounce at the London equities close, lower against $1,862.37 late Friday. However, earlier on Monday, the price hit a high of $1,878.75.
At the other end of the large-caps, hospitality stocks ended the worst performers, with InterContinental Hotels Group down 7.6% and Whitbread down 5.6%, amid fears rising inflation will curb discretionary consumer spending.
Scottish Mortgage Investment Trust lost 6.7% tracking a fall in high-profile US technology stocks in which it backs.
In the FTSE 250, transport operator National Express ended the best performer, up 3.2%, in a positive read-across from peer Go-Ahead.
Go-Ahead rose 12% to 1,360.00 pence, giving the firm a valuation of £587.2 million, after receiving two takeover proposals at terms it ‘would be minded to recommend’ should a firm offer materialise.
The Newcastle, England-based firm said it has received a takeover proposal from Sydney-listed transport Kelsian and another from a consortium consisting of Kinetic and Globalvia Inversiones.
Kinetic is a bus operator in Australia and New Zealand, while Globalvia is a Madrid-based transport infrastructure firm.
Kelsian operates transport services in the UK, Singapore and Australia. In May, Kelsian sold its Lea Interchange depot in east London to Stagecoach Group for £20 million.
Both approaches were unsolicited, Go-Ahead said.
At the other end of the midcaps, Ferrexpo shed 6.6% after the iron ore pellet producer reduced its output of iron ore pellets, amid difficulties in getting production out of war-torn Ukraine.
The Baar, Switzerland-headquartered firm mines for iron in central Ukraine. It produced 4.4 million tonnes of iron ore pellets so far in 2022 as of the end of May, down 8% from the same point in 2021.
Ferrexpo said it will lower production for a period of time as the war in Ukraine blocks its export routes.
The pound was quoted at $1.2150 at the London equities close, down sharply from $1.2321 at the close on Friday.
Sterling was dealt a blow after the UK economy unexpectedly contracted again in April, leaving the Bank of England in a tough spot when it meets on Thursday.
However, the central bank is still widely expected to continue on its rate hike path.
Data from the Office for National Statistics on Monday showed gross domestic product contracted by 0.3% in April on a month before, badly missing FXStreet-cited market consensus of 0.2% growth. The reading also marked a deterioration from March's 0.1% fall.
Services activity shrank by 0.3% in April - the largest contributor to April's drop in GDP - reflecting a substantial decrease in human health and social work, where there was a ‘significant reduction’ in NHS Test & Trace activity. Production fell by 0.6%, driven by a fall in manufacturing, and construction activity fell 0.4%.
The ONS added that this is the first time that all main sectors have contributed negatively to a monthly GDP estimate since January 2021.
Analysts at Rabo Bank explained: ‘GBP/USD has tumbled back to the 1.22 area on a combination of USD strength and a weak UK monthly GDP report for April. We continue to see risk of GBP/USD dipping to 1.20 on a 3 month view. This forecast assumes the greenback retains broad-based strength.
‘The negative UK April GDP print is unlikely to shake the consensus expectation that the BoE is poised to raise rates again this week, though it may subdue speculation of a 50 bps move.’
The euro stood at $1.0425 at the European equities close, down from $1.0518. Against the yen, the dollar was trading at JP¥113.90, down from JP¥134.13.
Meanwhile, the possibility of more restrictions in China's biggest cities weighed on oil prices, with concerns about a possible US recession and the stronger dollar adding to downward pressure on the commodity.
Brent oil was quoted at $119.33 a barrel at the equities close, down sharply from $120.90 at the close Friday.
The economic events calendar on Tuesday has Germany inflation readings at 0700 BST and US producer prices at 1330 BST. In addition, the Fed's two-day monetary policy meeting gets underway.
The UK corporate calendar on Tuesday has annual results from equipment rental firm Ashtead Group, half-year results from housebuilder Crest Nicholson and third-quarter earnings from plumbing specialist Ferguson.
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