Shares tumble as US Federal Bank’s warning that its stimulus programme is ending spooks global stock markets
Global markets took a plunge after some warning shots were fired by the United States Federal Reserve.
In minutes from the Fed’s July meeting, the American central bank – led by chairman Jerome Powell made clear its huge stimulus programme was drawing to a close.
The global economy – particularly stock markets – have been boasted by the Fed’s £88billion a month bond buying, which began at the outset of the coronavirus crisis in March 2020.
US Federal Reserve chairman Jerome Powell (pictured) made clear its huge stimulus programme was drawing to a close
The minutes said the tapering could finish by the middle of next year, opening the door for interest rate rises in the second half of 2022.
The taper tantrum pushed the FTSE 100 down 1.5 per cent, or 110.46 points, to 7058.86. In Paris the Cac 40 dropped 2.4 per cent and the Dax in Frankfurt lost 1.3 per cent.
Chinese data in recent months has been particularly weak, with industrial production and consumer spending decelerating over the summer.
China’s leaders have also announced plans this week to redistribute wealth in the country and regulate high incomes.
China’s president, Xi Jinping, said the country needs to ‘regulate excessively high incomes’, and ensure that the wealthy return more to society.
To make matters worse, soon after the Fed minutes were published investment bank Goldman Sachs cut its US growth forecast for the current quarter to 5.5 per cent from 8.5 per cent previously, citing the impact of the Covid Delta variant on the economy and higher inflation.
As a result commodity markets were also in the red. On the oil markets Brent Crude lost 5 per cent to $66 per barrel – a three-month low.
On the London Metal Exchange copper – the world’s most important industrial metal – dropped 2 per cent.