Where next for the FTSE 100 after suffering worst loss in over three years?

The blue-chip index fell by more than 3% on Wednesday, driven by weak economic data that could prompt global stocks to slide further in the final quarter of 2019.

The FTSE 100 suffered its worst day of trading on Wednesday since January 2016, with the blue-chip index losing more than 3% of its value. The European Stoxx 600 also recorded its worst trading day of the year.

The sell-off in UK and European equities was driven by poor US jobs and manufacturing data, as well as a decision by the World Trade Organisation (WTO) that will see $7.5 billion in US tariffs applied to EU goods.

Global stocks see sharp declines

On Wednesday, Germany’s DAX closed 2.8% lower, while France’s CAC 40 fell by more than 3%. In the US, the Dow Jones Industrial Average closed 1.9% lower – the second consecutive day that the index has fallen by more than 1%

The S&P 500 and the Nasdaq also closed lower, down 1.8% and 1.6% respectively.

‘The market is grappling with this intellectual tug of war,’ Ron Temple, head of US equities at Lazard Asset Management told the Financial Times.

‘On the positive side, the vast majority of the consumer data still looks pretty good. On the negative side, there is this global industrial slowdown,’ he added.

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Slowdown in China driving sell-off

Speaking to BBC News, Robert Pavlik, chief investment strategist manager at SlateStone Wealth, said that the global slowdown, particularly in China, is prompting investors to sell shares.

‘It's all adding up to the same thing essentially: worries that the global economy is slowing and giving investors reason to pause and take profits,’ he said.

The WTO recently slashed its forecast for global trade growth amid the ongoing US-China dispute.

The organisation said that world merchandise trade volume is expected to increase by 1.2% this year, representing a significant downgrade from the 2.6% it forecast back in April.

The WTO also revised its growth forecast in 2020 from 3% to 2.7%.

‘The darkening outlook for trade is discouraging but not unexpected,’ WTO Director-General Roberto Azevêdo said.

‘Beyond their direct effects, trade conflicts heighten uncertainty,’ he added. ‘Job creation may also be hampered as firms employ fewer workers to produce goods and services for export.’

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