Blue chips turn red as recession fears mount

Global stock markets kicked off September with a wide-ranging sell-off as growing fears of recession battered equities.

The FTSE 100 ended the first session of the month down 1.9 per cent, or 135.65 points, at 7148.5, 

its lowest level in seven weeks, and the more domestic-focused FTSE 250 slumped 3 per cent, or 570.01 points, to 18,493.74. 

The gloom continued on Wall Street in early trading as the Dow Jones Industrial Average dropped 0.2 per cent, the S&P 500 fell 0.7 per cent and the tech-focused Nasdaq tumbled 0.4 per cent.

Things were similarly grim on the continent, with Germany’s key Dax index closing down 1.6 per cent and France’s CAC 40 falling 1.5 per cent.

Asia also notched up losses with Japan’s Nikkei 225 dropping 1.5 per cent and the Hang Seng index in Hong Kong off 1.8 per cent.

Traders are becoming increasingly worried about the prospect of more interest rate hikes from central banks following the Jackson Hole conference in the US state of Wyoming last week.

At the gathering, Federal Reserve chairman Jerome Powell said the US central bank would ‘keep at it’ to reduce inflation, signalling more sharp interest rate rises, and warned bringing inflation down would incur ‘unfortunate costs.’

Peter Garnry, head of equity strategy at investment outfit Saxo Bank, said global stock markets had rallied over June and August as investors convinced themselves the world was ‘turning a corner for the better on inflation,’ and that the pace of rate increases may begin to subside to avoid derailing the economy.

But he said the ‘door to reality’ had finally been opened after Powell’s speech.

‘The Jackson Hole conference made it clear to the market that inflationary pressures are still way too high,’ Garnry said.