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22nd of October 2018

Economy



World on brink of FINANCIAL CRASH? Economic MELTDOWN as Europe, Asia and US markets PLUNGE

Investors have been rattled about rapidly rising interest rates and an expected slowdown in global economic growth.

While in Europe, the market has also felt the ripple effects of the ongoing fallout between Italy and European Union chiefs over Rome’s deficit budget proposal.

The FTSE 100 opened down 1.6 percent, while the pan-European Euro Stoxx 600 Index had dropped by 1.2 percent in early deals.

At 12:21pm, the FTSE 100 was trading at 7,030.90, according to Bloomberg, before later clawing back gains to reach 7,055.15 at 15:09 GMT.

In Italy, the FTSE MIB had tumbled by 1.5 percent this morning, before later clawing back some gains.

Markets also sunk this morning in Asia, with Japan's benchmark Nikkei 225 losing 3.9 per cent, its biggest daily drop since March.

China witnessed its lowest stock market level in almost four years, while the Shanghai Composite ended the day down 5.2 percent.

The turbulent start for investors comes after the US stock market tumbled, with the Dow Jones Industrial Average sinking last night by more than 800 points.    

As of 16:08 GMT, the Dow was down some 295 points, having initially clawed back gains of 42 points earlier this afternoon.

The S&P 500 fell to a fifth-day straight loss yesterday, the longest slump since President Donald Trump was elected, as Wall Street endured its sharpest one-day fall in months.

The crumbling of global markets comes following concerns from investors surrounding global economic growth and rising interest rates.

The Federal Reserve is raising interest rates which makes it more expensive for companies to borrow and harms share prices.

The rout suggests businesses are not able to sustain the runaway growth that is marked 2018 so far.

Investors are nervous a trade war would slash profits.

President Trump described the Fed as having “gone crazy” after walking off Air Force One in Erie, Pennsylvania for a rally.

He said: ”I think the Fed is making a mistake. They are so tight. I think the Fed has gone crazy.

"Actually, it's a correction that we've been waiting for for a long time, but I really disagree with what the Fed is doing.”

The International Monetary Fund downgraded its predictions for global growth this week, and is now forecasting 3.7 percent global growth in both 2018 and 2019.

This is down from its July forecast of 3.9 percent growth for both years.

Maurice Obstfeld, the IMF's chief economist, pointed part of the blame to growing tensions between the US and China, who are currently locked in an increasingly bitter trade war.

Mr Obstfeld said at a media briefing about the fund's latest World Economic Outlook: "When you have the world's two largest economies at odds, that's a situation where everyone suffers.”

He continued: ”Trade policy reflects politics and politics remain unsettled in several countries, posing further risks.”

Investors have also been keeping their eyes on rising US Treasury yields.

The benchmark 10-year note yield recently soared its highest level in seven years while the two-year yield reached its highest mark since 2008 earlier this week.

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