Crude oil is at lowest price in two and a half months, and UK has also seen falls in prices of copper and platinum

This article is more than 4 years old

This article is more than 4 years old

Stock markets have tumbled on both sides of the Atlantic, after a slump in oil prices and uncertainty over the prospect for US interest rates triggered anxiety among financial traders.

The FTSE 100 dived by almost 2% to 6178 by the close of trading on Thursday, while the New York Dow Jones was down more than 200 points at 17,492 as traders sought safe havens for investor funds.

German and French stock markets were also hit by reports of an oil glut and huge surpluses of world stocks of platinum, lead and copper following the slowdown in China, the biggest user of base metals.

Speeches by US central bank policymakers added to the concerns over the prospects for global growth after they appeared to confirm a rate rise next month, but hinted that further rises by the Federal Reserve may be delayed for months, or even years.



Markets had appeared more confident in recent weeks following the turmoil in August and September, triggered by events in China, that sent shares into freefall and delayed an expected rise in rates by the Fed.



The situation was stabilised after Beijing put together a stimulus package, while the European Central Bank (ECB) hinted that it planned to inject further funds into the eurozone economy to maintain recovery.

However, with a US rate rise looming into view again, even another comment from the bank’s boss Mario Draghi that he plans to go ahead with extra quantitative easing, possibly early next year, could not offset fears that global growth remains fragile and easily upset by higher borrowing costs in the US.

Copper futures in London hit a six-year low of $4,851 (£3,186) a tonne and platinum hit its lowest since late 2008 at $868.75 an ounce. Crude oil prices hit a two-and-a-half-month low, with Brent futures down $1.48, or 3.2%, at $44.3 a barrel.

The dollar rallied against the euro and the pound after Draghi’s dovish address to members of the European parliament. But the currency markets shifted after Federal Reserve Bank of St Louis president James Bullard, generally one of the Fed’s more hawkish members, suggested industrial nations may be headed into an era of permanently low rates.

“Should we find ourselves in a persistent state of low nominal interest rates and low inflation, some of our fundamental assumptions about how US monetary policy works may have to be altered,” said Bullard.

But the Fed’s New York president, William C Dudley, said a return to a path of rising interest rates was possible.

“I think it is quite possible that the conditions the [central bank’s rate-setting] committee has established to begin to normalise monetary policy could soon be satisfied,” he said.

“I will be evaluating the incoming information to see if it confirms my expectation that growth will be sufficient to further tighten the US labour market.”

Chicago Fed leader Charles Evans, a dovish member of the central bank’s board, earlier stressed any increases should be “gradual” and that the base rate, currently 0.25%, could be less than 1% at the end of next year.

In an address to the European parliament, Draghi said inflation remained weak and that a “sustained normalisation” of inflation could take longer to achieve than thought.



“Although the debate at the ECB seems to be far from over, the fact that Draghi made these comments in a high-profile setting suggest that he is confident that the majority of the ECB council will support him,” said Holger Schmieding, chief economist at Berenberg Bank in London.



