Bloodbath for US stocks as Dow endures biggest points fall in history
5 February 2018, 13:38
A bloodbath for US stock values has seen the Dow Jones Industrial Average suffer its biggest daily point decline in its 122-year history.
Global markets have turned sharply lower this month as investors worry about the impact of rising inflation and higher interest rates in the United States.
The biggest declines in US stocks - especially financial and energy shares - took place after markets had closed down in Asia and Europe, including London where the FTSE 100 ended the session 1.5% lower.
The contagion was a reaction to Wall Street slipping sharply on Friday following strong US wage data and the drops intensified again just before 8pm UK time on Monday - erasing all 2018's gains for US markets in just minutes with the Dow down by more than 1,500 points at one stage.
Market experts said it represented the biggest fall ever recorded in a trading session for the Dow though it later closed 1,175 points or 4.6% lower. The main S&P; 500 and Nasdaq saw similar falls.
Some analysts saw the declines as a return to volatility following a benign 2017.
But Naeem Aslam, chief markets analyst at Thinkmarkets, believed automated trades - which kick in to reflect sharp market movements - contributed to the steepest declines.
"The regulators need to address this issue because a drop like this is worse than anything on the street, we are talking about real companies with revenue streams."
He added: "The most interesting aspect was that we didn't see the mammoth move in gold and the reason for that is because it was the war of machines and this was not 1987- at least for now.
"The volatility index on the other hand exploded quickly and surpassed levels which we have not seen in years."
Stock exchanges in London and New York have been trading at record highs recently, helped by Donald Trump's tax cut policies and burgeoning global growth.
But a key jobs report on Friday - showing strong growth in the US labour market - appears to have been the catalyst for the rally to come to a halt, at a time when some observers have suggested a so-called correction might be due.
Stronger than expected wage growth in the world's biggest economy could mean sharper increases in interest rates should the US Federal Reserve feel the need to curb inflationary pressure.
Those higher rates will see shares start to look less attractive compared to other investments, particularly with bonds - parcels of government debt, which are offering higher yields.
Reacting to the market fall White House spokesperson Sarah Huckabee Sanders said: "The President's focus is on our long-term economic fundamentals, which remain exceptionally strong, with strengthening US economic growth, historically low unemployment, and increasing wages for American workers.
"The President's tax cuts and regulatory reforms will further enhance the U.S. economy and continue to increase prosperity for the American people."
The FTSE 100's fall took it to two-month lows on Monday, slipping close to the 7,300-mark - having reached nearly 7,800 in January.
Its decline over recent days has been partly due to a strengthening in the pound after a long period of post-Brexit vote weakness.
A weaker pound tends to be good for the FTSE 100 because it boosts the value of multinational firms' overseas earnings.
However, on Monday, sterling was down at the same time as the share index was enduring a sharp fall.
The pound slipped by a cent to near $1.40 against the US dollar after monthly economic data from the UK's dominant services suggested a growth slowdown at the start of 2018.
(c) Sky News 2018: Bloodbath for US stocks as Dow endures biggest points fall in history