The fall in the global market has wiped out $ 13 trillion in global equities in the worst start of a year on record, as business and consumer confidence collapses amid rising inflation.
The MSCI World Equity index has fallen more than 20% so far this year in the sharpest fall in the first half since its inception, led by a fall in technology companies with losses as investors they are frightened by the end of very low interest rates.
In the UK, the FTSE 100 fell 1.96% on Thursday to close its worst month since the early days of the Covid pandemic.
All but ten shares closed in the red, reducing the value of blue chip companies by £ 50bn, amid fears the country will suffer the strongest recession in Europe.
It came after official figures revealed that British households have suffered the longest drop in disposable income ever, with a 1.3% drop a year to March 2022.
Paul Dales, chief economist at UK Capital Economics, said: “While GDP and consumer spending will not fall as far as real incomes, it is quite clear that the economy will be very weak for a while. A recession is a real risk. “
Wall Street also suffered heavy losses on Thursday as fears of a slowdown were exacerbated by data showing inflation-adjusted U.S. consumer spending fell in May for the first time this year.
The benchmark S&P 500 fell 0.9%, while the high-tech Nasdaq fell 1.3%. The S&P 500 has lost 20% so far this year, marking its worst first half of the year since 1970 and its worst performance in two quarters since the 2008 financial crisis.
The Nasdaq recorded its biggest drop during the same period, losing $ 5.4 trillion in value.
Investor concern deepened this week as major central banks reiterated their commitment to raise interest rates to cope with rising prices driven by Russia’s war in Ukraine.
Andrew Bailey, governor of the Bank of England, warned that the UK is facing a faster and sharper fall than other rich countries, but still promised to act “more forcefully” if high inflation persists, which it is currently expected to reach 11% in October.
Jerome Powell, chairman of the Federal Reserve, insisted he would not allow the U.S. economy to fall into a “higher inflation regime.”