Investors have been spooked by rising interest rates coupled with a predicted global economic slowdown, fuelled by growing tensions between China and the United States.
Asian markets Shanghai and Tokyo suffered significant drops, down by 5.2 percent and nearly four percent respectively, at closing on Thursday.
The gloomy picture was mirrored around Europe with all the major indexes in the red by up to 1.7 percent before 10am BST.
The UK’s FTSE also opened 1.6 percent down but had bounced back to 7,062.75 at 2.29pm, according to Bloomberg.
The International Monetary Fund warned this week further conflict between the US and China could cause a “sudden deterioration in risk sentiment, triggering a broad-based correction in global capital markets and a sharp tightening of global financial conditions”.
Is this the beginning of the next global financial CRASH?
Wall Street’s 3.2 percent market dropped on Wednesday was enough to send stock market shares into freewill elsewhere – but a global financial crash is not on the cards just yet, according to one business giant.
Axel Weber, chairman of UBS, told CNBC investors’ mood had flipped-flopped from overly optimistic to “too pessimistic” – but this was temporary.
According to CNBS, Mr Weber “recognised global growth was in a late cycle phase, but he did not expect to see a global economic recession”.
On concerns of a possible trade war between Washington and Beijing, Mr Weber said: “I think investors have been spooked.
“I think it is an overreaction to policy noise and policy noise is always short term.”
What about US rising interest rates?
The Federal Reserve has been ramping up interest rates, making it more expensive for business to borrow and making borrowers nervous.
President Trump called the US central bank’s continued interest hike “crazy” yesterday.
But the Federal Reserve’s decision was today defended by International Monetary Fund director Christine Lagarde who said it was “extremely serious” and based on “actual information”.
The effect of rising US interest rates may be too early to know yet, but one expert has called on the Fed to reconsider the hike to ease concerns.
Bilal Hafeez, the chief economist at Japanese bank Nomura, said: “The Fed could provide some comfort to markets.
They could acknowledge the deterioration in financial conditions and soften their hawkish tone.
“The Fed’s recent rhetoric suggests this is unlikely, but a combination of the scale of the moves and even President Trump’s vocal criticism’s may influence them.”
As seen on
Daily Express :: Finance Feed