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Global stocks head lower after suffering worst first-half for decades

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·Business Reporter, Yahoo Finance UK
·3 min read
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A broker looks at a graph on his computer screen. Stocks in Europe and the US headed lower on Friday
Around $13tn (£10.7tn) was wiped off global stocks in the worst first half of the year on record on Thursday. Photo: Simon Dawson/Reuters

The FTSE 100 (^FTSE) closed 0.2% lower in London, putting it on track for its fourth weekly decline in five, as inflation and recession fears continued to drag down markets.

On Thursday, the index suffered its worst month since the outbreak of COVID-19 in March 2020, while around $13tn (£10.7tn) was wiped off global stocks in the worst first half of the year on record.

At Thursday’s close, the MSCI’s World Equity Index had declined by a fifth this year, the worst since it was created in 1990.

In Paris on Friday, the CAC (^FCHI) was treading water, up just 0.1%, while the Frankfurt DAX (^GDAXI) bucked the trend at 0.3% up at the close.

“On a relative basis, the FTSE 100 has been a rare beacon of light, having lost 3.5% so far this year, most of which can be offset by an annual dividend yield of 3.6% for the index, on a total return basis," Richard Hunter, head of markets at Interactive Investor, said.

“The large exposure of the index to oil and mining stocks has been supportive given general commodity prices, while sterling weakness has also enriched the overseas earnings on which the constituents largely rely.

“However, as evidenced by another weak opening, volatility and uncertainty unfortunately remain key watchwords.”

It came as eurozone inflation hit a record 8.6% in the month of June, deepened the cost of living crisis in the bloc.

Consumer prices surged accelerated from the 8.1% inflation recorded in May, and higher than forecast, adding pressure on the European Central Bank (ECB) to start raising interest rates from record lows this month.

Read more: Homeowners facing £2,500 a year mortgage increase

Across the pond, the S&P 500 (^GSPC) dipped 0.2% and the tech-heavy Nasdaq (^IXIC) fell almost 0.2% after opening deeper in the red. The Dow Jones (^DJI) edged 0.2% lower by the time of the European close.

It came after a rout on Thursday, fuelled by recession fears, with warnings of a bleak outlook for the global economy as central banks slam on the brakes to battle runaway inflation.

Data showed that US consumers were growing increasingly reserved about spending, which dealt a fresh blow to equities. The S&P 500 suffered its worst January-June period since 1970, down over 20% during 2022.

The Dow Jones, meanwhile, has fallen by 15.3%, while the Nasdaq index, representative of high growth and big technology companies, has lost 29.5%.

Watch: S&P 500 marks steepest first-half slide since 1970

“It’s hard to overstate just how bad markets have performed over recent months, with the returns in Q2 very much following in Q1’s footsteps,” Deutsche Bank’s Jim Reid said.

“A range of asset classes saw significant losses, including equities, credit and sovereign bonds, whilst the US dollar and some commodities like oil were among the few exceptions.”

On Friday, new data showed that American manufacturers grew at the slowest pace in two years last month.

The Institute for Supply Management’s June manufacturing PMI fell to 53% last month, down 3.1 percentage points from the reading of 56.1% in May, a level that shows slower growth.

Asian markets struggled once again overnight, taking their cues from the sell-off on Wall Street.

After a broad retreat on Thursday, markets battled to recover but with little conviction, leaving the Nikkei (^N225) down 1.7% in Tokyo while the Shanghai Composite (000001.SS) dipped 0.3%.

The Hang Seng (^HSI) in Hong Kong was closed for a holiday.

Watch: How does inflation affect interest rates?