Mounting downturn jitters send London’s FTSE 100 lower

Mounting concerns about a global economic downturn sent London’s top indexes tumbling today.

The capital’s premier FTSE 100 index shed 1.96 per cent to close at 7,169.28 points, while the domestically-focused mid-cap FTSE 250 index, which is more aligned with the health of the UK economy, fell 1.95 per cent to 18,666.78 points.

A combination of rising interest rates, the worst inflation crisis in the rich world for decades and ongoing supply chain disruption is threatening to tip some of the globe’s largest economies into recession.

The likelihood of central banks taming rising living costs through rate hikes without plunging their respective economies into reverse is receding.

US Federal Reserve chief Jerome Powell warned earlier this week there is a risk the central bank will go “go too far” in tightening monetary policy.

Bank of England governor Andrew Bailey also warned a larger rate rise is “on the table” at the central bank’s next meeting on 4 August.

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: “A sense of foreboding is again gripping financial markets, with anxiety rising that by attacking inflation, central banks risk severely weakening economies.”

The pound repaired some of the damage it has sustained against the dollar over the past few months, strengthening 0.35 per cent to buy $1.2168.

Yields on UK government debt edged lower in a sign investors’ risk appetite is falling away. Prices and yields move inversely.

Retailers led losses on the FTSE 100, with bargain store B&M falling over five per cent. Luxury fashion firm Burberry shed over three per cent.