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The two biggest movers of equity markets over the past few years have been China and the US Federal Reserve, and both have had a negative impact on stocks over the past 24 hours. Yesterday evening, the Fed hinted it may taper its quantitative easing programme in the next three-to-nine months. Traders have become accustomed to the support that the US central bank has been providing, and the prospect that the Fed could reduce its scheme sent investors running for the hills.
Fears that China is slowing down were confirmed last night, when the HSBC survey of manufacturing in the country showed that the sector contracted for the second month in a row. The mining sector has the largest weighting in the FTSE 100 index, and mining stocks are down nearly 5% due to weaker metal prices.
In the US, the Dow is down 1.5%. Stronger-than-expected existing homes sales, combined with a large jump in the Philadelphia manufacturing index, have stoked fears that the Fed will reduce its stimulus package.