US Fed’s hawkish tilt pours cold water on global markets

The sudden realisation that equity markets may not be propped up by ultra loose monetary policy for much longer after the US Federal Reserve released minutes highlighting the scale of its hawkish turn poured cold water on investors today.

London’s premier FTSE 100 index closed 0.88 per cent lower at 7,450.37 points, while the mid-cap FTSE 250 index, which is more aligned to the health of the UK economy, slid 1.49 per cent to finish at 23,416.92 points.

Investors around the world were spooked by the Fed signalling in minutes from their latest meeting published on Wednesday that interest rates may rise sooner than expected.

Several flagship indexes on the Continent plunged today. France’s CAC 40 finished 1.72 per cent lower, while Germany’s Dax 30 lost 1.35 per cent.

The pan-European Stoxx 600 dipped 1.25 per cent.

Tech stocks on Wall Street nursed heavy losses yesterday on news that accommodative monetary policy, which tends to boost the sector, may be reined in quicker than thought. But, the Nasdaq opened up yesterday.

Russ Mould, investment director at AJ Bell, said: “The Federal Reserve continues to wield considerable power over global markets and its latest comments are not what investors want to hear.”

In London, mining stocks led the FTSE 100 lower, with the likes of Fresnillo, Polymetal and Antofagasta all tumbling more than 3.20 per cent.

Banking stocks rose due to sentiment toward the sector improving as it benefits from higher interest rates.

NatWest, Barclays, Lloyds and HSBC all ranked in the top five best performers’ on the FTSE 100.