Global stock markets tumbled on Thursday as fears over rising inflation and slowing economic growth spread from the US and Asia to Europe. The FTSE 100 index of leading UK companies fell 1.8%, while France's CAC-40 and Germany's DAX dropped 1.3% and 0.9% respectively.
The sell-off followed a sharp decline on Wall Street on Wednesday, when the S&P 500 fell more than 4% and the Dow Jones Industrial Average dropped 3.5%, their biggest one-day falls since the early days of the Covid pandemic. The tech-heavy Nasdaq slumped 4.7%.
Investor sentiment was rattled by gloomy forecasts from major US retailers. Target reported that unexpectedly high fuel and freight costs had halved its profits, while rival Walmart issued a similarly downbeat update earlier in the week. Target's shares plunged 25%, their biggest decline in over 30 years.
In the UK, shares in consumer-focused companies were hit hard. Tesco fell 1.8%, Unilever dropped nearly 1%, and Royal Mail sank more than 12% after warning of 'significant headwinds' from rising costs. The FTSE 100 closed 135 points lower at 7,302.7.
Analysts warned that markets are increasingly nervous about a potential recession. 'A red wall of worry has built up across financial markets with investors increasingly nervous that economies are set to career into recession,' said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.
In Asia, Japan's Nikkei index closed down 1.9%, while Hong Kong's Hang Seng dropped 2.5%. The UK's inflation rate hit a 40-year high of 9% in April, adding to concerns that central banks' interest rate hikes to curb price rises could tip economies into a slowdown.
