You know things are bad when you can count the stocks ending the day in positive territory on one hand.
London’s FTSE 100 saw just three stocks end the day in positive territory, with United Utilities and Severn Trent making up a touch of the ground lost since fears were raised about the financial health of Thames Water and supermarket giant Tesco proving that every little does indeed help.
It was with a sense of déjà vu investors ruminated over impending recession warning signs and a Fed back in hawkish form.
The nerves were frayed further by the good news which actually means bad news for markets with signs that US jobs remain remarkably spritely despite months of rate hikes and fears of an economic slowdown.
Whilst headlines will be dominated by Janet Yellen’s visit to China amid trade tensions, investors are paying more attention to the country’s lack of growth despite upbeat promises from authorities.
Miners were amongst the day’s biggest fallers helping London’s blue-chip index sink to levels not seen since the banking sell-off in March.
It has become commonplace for bond yields to enter the conversation around dinner tables and in coffee shops since last year’s mini-Budget, but now they have a new phrase to mull over.
With 2-year UK bond yields hitting their highest levels since 2008, and 10-year gilts almost a full percentage point behind, there will be plenty of column inches dedicated to the ‘inverted yield curve’.
Put simply, investors want higher returns for shorter dated bonds, believing interest rates will keep rising for now but that recession will swiftly follow.
And with the country’s economic situation looking decidedly ropier than it did a year ago, it’s a pretty sure bet that rates will have to come down to help re-start a cooling engine, once the last dregs of inflation have been flushed through the system.
The longer the gap between the two events, the worse the UK economic prospects look.
Homeowners are undoubtedly bearing the brunt of things at the moment and the bucket of cold water being poured over the housing market by the Bank of England is making investors increasingly nervous about the immediate fortunes of housebuilders and building materials companies alike.
Today’s grey skies aren’t limited to London, though. European indices and Wall Street have all felt the chill and it seems investors may need to keep a sweater on hand and a level head if they are to ride out the storm.
Danni Hewson is head of financial analysis at AJ Bell
