Stock markets: FTSE 100 and European indexes plunge amid 'genuine carnage' among global markets

Stock markets across Europe plummeted amid fears banks could be forced to hike interest rates as "carnage" hit exchanges across the globe.

The UK's FTSE 100 fell 2.5 per cent on Tuesday while Germany's Dax plunged 2.7 per cent and France's Cac 40 dropped 2.1 per cent on Monday's close.

The FTSE 100 has fallen sharply amid dramatic global sell-offs, with the UK benchmark index tumbling by 3.5 points shortly after the market opened on Tuesday.

Shares also tumbled in Asia on Tuesday morning following the dramatic day in the US market.

Japan’s Nikkei 225 index suffered its biggest one-day point drop since 1990 before showing signs of recovery.

Market experts have described “genuine carnage” following the plunge.

Chris Weston, chief market strategist at IG in Australia, told the Washington Post: “There’s genuine carnage out there… Everyone is just running for the hills because nobody actually knows what is causing this move.”

World markets had reached record highs with a strengthening global economy and healthy corporate earnings.

But a massive sell-off then began when a US jobs report fuelled expectations that the Federal Reserve will increase interest rates faster than expected.

Japan's Nikkei 225 index was down 4.7 per cent as the markets closed yesterday, and Hong Kong's Hang Seng plummeted by 4.5 per cent.

South Korea's Kospi index fell by 2.6 per cent, and Australia's benchmark S&P/ASX 200 lost 3.2 per cent.

The decline in the US was the largest in percentage terms since August 2011, when markets sunk low in the aftermath of “Black Monday”.

In statement, the White House said it was focused on "long-term economic fundamentals, which remain exceptionally strong".

Two days of steep losses have erased the US market's gains from the start of this year and ended a period of record-setting calm for stocks. Banks fared the worst as bond yields and interest rates nosedived.

Health care, technology and industrial companies all took outsize losses and energy companies sank with oil prices.

"It's like a kid at a child's party who, after an afternoon of cake and ice cream, eats one more cookie and that puts them over the edge," said David Kelly, the chief global strategist for JPMorgan Asset Management.

He said the signs of inflation and rising rates are not as bad as they looked, but after the market's big gains in 2017 and early 2018, stocks were overdue for a drop.

The Standard & Poor's 500 index, the benchmark most professional investors and many index funds use, skidded 113.19 points, or 4.1 per cent, to 2648.94.

That was its biggest loss since August 2011, when investors were fearful about European government debt and the US came close to breaching its debt ceiling.

The Nasdaq composite fell 273.42 points, or 3.8 per cent, to 6967.53.

In London, the FTSE 100 index of leading companies also fell by 1.46 per cent or 108 points.

The slump began on Friday as investors worried that creeping signs of higher inflation and interest rates could derail the US economy along with the market's record-setting rally.

Energy companies, banks, and industrial firms are taking some of the worst losses.

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