FTSE 100 in positive territory as global markets start to recover from bloodbath

The FTSE 100 was back in positive territory on Friday as global stock markets tentatively recovered from a widespread sell-off.

London’s blue chip index was up 0.3% in early trading at around 7,030 points, but was still hovering near its lowest level since March.

A day earlier, the FTSE 100 suffered its largest one-day drop since June after falling 1.9%.

European stocks were on the mend, with the French CAD 40 and German DAX up around 1% and 1.2%, respectively.

Investors have been heading for the exit on concerns over rising US bond yields, with America’s massive borrowing looking vulnerable given the costs of servicing the debt.

Markets have also been jittery over mounting trade tensions between the US and China, which could hit global demand.

But reports that US President Donald Trump could hold talks with his Chinese counterpart, Xi Jinping, on the sidelines of the forthcoming G20 meeting seemed to have lifted investor spirits.

Asian markets set the tone overnight, with Japan’s Nikkei 225 and Hong Kong’s Hang Seng Index having settled in positive territory  – up 0.4% and 2% – despite the stock market bloodbath having knocked US markets even further.

The Dow and S&P 500 both closed down more than 2%.

In currency markets, the pound was higher by nearly 0.2% against the US dollar at 1.325 and rose 0.1% versus the euro to 1.142.

Brent crude prices were also on the increase, up 1.2% at 81.27 US dollars per barrel.

Sentiment does remain fragile

Neil Wilson, chief market analyst for Markets.com, said it was worth questioning whether this was all “a sign of the proper recovery kicking in, or another dead cat bounce”.

“Sentiment does remain fragile – having been initially a reaction to the sudden rise in US bond yields, the selling has taken on a broader risk-off guise,” he said.

“That means that, whilst we initially saw bonds and stocks sold off in lockstep, we are now seeing bid for bonds as investors seek those attractive yields.”

He said the continued drop in US stocks may also signal wider investor concerns regarding American company earnings in the third quarter.

“The breadth and depth of the decline in the US market is a concern and suggests earnings and valuations are a factor.

“In addition to the yield narrative, in many ways this sell-off could reflect real angst about the Q3 earnings season and what outlook is painted by corporates on earnings calls.”

- Press Association

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