Global stock markets have tumbled with investors unsettled by the continued slide in oil prices and fears about the impact on global growth.
Germany’s Dax, the UK’s FTSE 100, and the Cac 40 in Paris were all down by about 3%, wiping out the gains recorded on January 19.
The drop in the FTSE puts it on the brink of a so called “bear market” – a 20% fall from April’s all-time high.
The falls came after Asian stocks closed sharply lower.
Dubai markets closed at a 28-month low, while in Japan shares fell to their lowest level since October 2014.
Top emerging market shares and currencies were also caught up in the turmoil, with the Russian ruble hitting a new record low of 80.295 against the dollar.
The downwards move came after oil prices continued to slide, with the price of international benchmark Brent Crude down 2.4% at $28.08 a barrel, around a 12-year low.
The oil price has plummeted 75% since mid-2014 as oversupply, mainly due to US shale oil flooding the market, has driven down the cost of the commodity.
At the same time, demand has fallen because of a slowdown in economic growth in China and Europe.
The world’s energy watchdog warned on January 19 that the market could “drown in oversupply”.
The International Energy Agency, which advises countries on energy policy, said it expected the global glut to last until at least late 2016.
The IMF’s decision on January 19 to downgrade its global growth forecast for this year and issue a warning about the outlook added to the dark mood among investors.
World stocks are now at their lowest levels since 2013, with the MSCI world equity index down 9.9% in January, its biggest drop since 2009.
Analysts said they expected the volatility to continue.
The European stock markets have surged after the Federal Reserve increased interest rates for the first time since 2006.
The main share indexes in France, the UK and Germany’s were all up by between 1% and 3% in morning trade.
The US central bank increased the range for its benchmark interest rate to between 0.25% and 0.5%, from the previous range of 0%-0.25%.
The Fed said the rise was part of a “gradual” process to get rates back to normal after years of being near zero.
“Considerable improvement” in the jobs market spurred the Fed into action.
London’s FTSE 100 rose 1.4% to 6,146.68, while Frankfurt’s Dax jumped more than 3% and the Cac 40 in Paris was 2.5% higher.
Photo Reuters
The European stock markets were following the lead given by markets in the US and Asia.
On Wall Street, the Dow Jones closed up 224.18 points, or 1.3%, at 17,749.09, while in Japan, the benchmark Nikkei 225 closed up 1.6% at 19,353.56.
After the Fed’s decision, the dollar rose against larger major currencies. Higher rates make the US a more attractive market for deposits, meaning demand for the dollar is likely to rise.
However, sterling recovered ground lost against the dollar and was 0.3% higher against the euro to €1.3783 after positive retail sales numbers for November.
At one point £1 bought almost $1.50.
British government-issued bonds, or gilts, rose in price following the Fed decision, meaning lower yields, or income.
Benchmark ten-year gilt yields fell 0.056 percentage points to 1.89%. While the specter of higher rates is often bad for existing debt prices, analysts said investors were pleased future Fed rate rises would be “gradual” in nature.
World’s markets have staged a partial recovery after a week of precipitous falls and volatility.
London’s FTSE 100 index was up over 1% in mid-afternoon trading, while Germany’s DAX was up 1.76% and France’s Cac 40 was up more than 2%.
On Wall Street, the Dow Jones index opened nearly 1% higher after better-than-expected US industrial production data helped steady the ship.
Fears over a weakening global economic outlook had unsettled investors.
World’s markets have staged a partial recovery after a week of precipitous falls and volatility
The FTSE 100 had fallen 10% since early September, wiping £175bn off the value of listed businesses.
Steven Saywell, head of foreign exchange strategy at BNP Paribas, said the real concern over the faltering eurozone economy was inflation, currently running at 0.3%.
“We believe the risk is it could fall even further,” he said.
BNP Paribas believes European Central Bank president Mario Draghi should take bold measures to buy sovereign bonds in an attempt to convince investors that the rate of inflation would increase.
Car maker PSA Peugeot Citroen is writing down the value of its assets by 4.1 billion euros ($5.5 billion) to reflect the worsening state of the car market.
Peugeot said new accounting guidelines had prompted the move and that it was reversible when conditions improve.
The statement comes ahead of next week’s earnings and indicates it will report heavy losses for the period.
Global sales at France’s largest car firm fell 16% in 2012 to less than three million.
Peugeot is in the process of cutting 8,000 jobs and closing a factory to stem losses.
PSA Peugeot Citroen is writing down the value of its assets by 4.1 billion euros to reflect the worsening state of the car market
Chief financial officer Jean-Baptise de Chatillon said: “There was a realization in the second half that the crisis was going to be longer than expected… This is purely an accounting adjustment which has nothing to do with operations.”
France’s market regulator last year demanded that companies value their assets more realistically – prompting a 7.4 billion-euro charge from Credit Agricole.
A report in the French newspaper Liberation said the government was examining the possibility of buying a stake in the struggling company as a “last-resort plan”.
Peugeot, a founding member of the main French stock market index, the Cac-40, was demoted last year as a result of its tumbling share price.
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