The UK’s leading shares on Monday witnessed £49bn taken from their collective value, this came after another wave of fear over the condition of the British economy and the worries over the outlook of Britain’s banks which are in the process of being sued by regulators from the United States.
Investor confidence dented
This morning the FTSE 100 dropped by 3.6% which is equivalent to 189.45 points to finish the day at 5,102.58 after the confidence of investors was dented by a fall in the growth within the services sector during August.
The Markit/CIPS services purchasing managers’ index saw a drop to 51.1 last month from 55.4 the month before. The index fell by its biggest margin since the foot and mouth disease caused wide effect ten years ago.
The size of the drop has took many economists by surprise after being much bigger than expected and this has triggered fears that maybe the United Kingdom is about to be hit by another recession.
The news that Royal Bank of Scotland, HSBC and Barclays are being sued by the US Federal Housing Finance Agency has also affected investor confidence negatively. The banks are being sued for the amount of £121bn for taking part in the sale of mortgage debt to American home loan financial institutions, Fannie and Freddie Mac, just before the financial crisis begun.
Another volatile five days
Many traders have stated that this week could mark the start of another volatile five days for the stock markets.
Yusuf Heusen, sales trader at IG Index has said: “The FTSE has started the week off with a triple-digit loss, as significant drops in the likes of Barclays and RBS have dragged blue-chips lower. We may have to wait until the resumption of US trade on Tuesday to see if [the] drop is just a correction or the start of another steeper sell-off.”