Growth fears sink equity markets

Equity markets remain on the back foot this morning, after a torrid session in the US when growth fears saw indices tumble rapidly.

Christine Lagarde
Source: Bloomberg

A warning from the IMF about the global economy provides a handy excuse for a selloff, even if the body’s record for economic predictions (especially where the UK is concerned) is not particularly stellar.

Positive momentum from Friday’s non-farm payrolls failed to hold into the new week, and the gap between job numbers and the start of earnings season has allowed investors to, again, focus on their fear that the world economy is headed for another slump.

The dramatic falls in commodity prices provide ample reason to be concerned, and if the rosy assumptions underpinning valuations come into question, the final quarter of the year could become very ugly indeed.

The demise of AIM-listed London Mining has captured attention today, but this is just the most spectacular event in the long-running carnage being witnessed in the mining sector, as investors abandon the hope of growth for the certainty of bonds, however low the yield may be.

Alcoa’s earnings offer the first real beam of light for battered equity markets, with corporate news from the US once again forced to step in and rescue a beleaguered equity rally. Before that, however, Federal Reserve minutes will dominate the agenda. The tense standoff between hawks and doves continues, but from the tone of recent speeches it seems that the cautious consensus on rates is looking shakier by the week. Janet Yellen may be forced to make concessions in later statements this year, in order to avoid losing the image of calm control she has hitherto maintained.

Ahead of the open, we expect the Dow Jones to start five points lower at 16,714.

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