Major indexes in the States lost close to 2% of their value in one trading session. The Dow Jones Industrial Average saw 332 points knocked off to finish at 17662, the S&P 500 fell 35 points to 2044 and the Nasdaq Composite fell 82 points to 4859.
The falls leave the Dow and Nasdaq some way off their recent symbolic high water marks of 18000 and 5000 respectively.
The principle driver of the poor sentiment was a dawning realisation that a Federal Reserve interest rate rise in the near future is becoming inevitable as the US economy heats up and unemployment falls.
That realisation is already driving the US dollar up, making American exporters less competitive, and the effect has been compounded by the euro moving in the opposite direction as the European Central Bank’s quantitative easing programme kicks in.
UK equities have started the day close to flat with the FTSE 100 just 3 points up as investors wait and see what will happen when the opening bell sounds across the Atlantic.
“Yesterday the S&P 500 fell over 300 points or 1.85% as good job data from the states caused investors to fear interest rates may rise as early as June, at the same time the US dollar rose to a 12 year high against the euro,” said Adrian Lowcock, AXA Wealth’s head of investing.
“Good news continues to be seen as bad news by investors. Stronger employment figures have been blamed for the sell-off yesterday,” he added. “These should be good for the US economy as more people re-enter work and are able to earn and spend. However, the better the US economy is doing the more likely it is that the US Federal Reserve will raise interest rates sooner, possibly as early as June.”
“Investors are wary of rising interest rates because they have become accustomed to loose monetary policy through record low rates and quantitative easing,” Lowcock said.
