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World markets in fragile mood as Federal Reserve prepares to push the button World markets in fragile mood as Federal Reserve prepares to push the button
(35 minutes later)
Stock market investors are braced for panic selling in New York and London ahead of what is expected to be the first rate rise by the US Federal Reserve since 2006.Stock market investors are braced for panic selling in New York and London ahead of what is expected to be the first rate rise by the US Federal Reserve since 2006.
The US central bank will decide on Wednesday whether to raise interest rates as a mark of the US economy’s strong recovery since the 2008 banking crash.The US central bank will decide on Wednesday whether to raise interest rates as a mark of the US economy’s strong recovery since the 2008 banking crash.
But Fed boss Janet Yellen is expected to announce the increase in borrowing costs despite a slowdown in global trade and a slump in oil and commodity prices that has pushed inflation down to near zero in most developed countries.But Fed boss Janet Yellen is expected to announce the increase in borrowing costs despite a slowdown in global trade and a slump in oil and commodity prices that has pushed inflation down to near zero in most developed countries.
Shares plunged on Friday and oil prices tumbled as the date neared for the Fed decision and investors became increasingly nervous of the impact on highly indebted emerging market economies.Shares plunged on Friday and oil prices tumbled as the date neared for the Fed decision and investors became increasingly nervous of the impact on highly indebted emerging market economies.
The level of borrowing by businesses and governments in China, Thailand, Indonesia, Brazil has soared in the last decade. Borrowing by emerging market economies has quadrupled from $4tn in 2004 to over $18tn in 2014, much of it in dollars, making them vulnerable to higher US interest rates. The level of borrowing by businesses and governments in China, Thailand, Indonesia, Brazil has soared in the last decade. Borrowing by emerging market economies has more than quadrupled from $4tn in 2004 to over $18tn in 2014, much of it in dollars, making them vulnerable to higher US interest rates.
Phil Shaw, chief UK economist at fund manager Investec, said it was almost certain the Fed would raise rates, but the question for markets was whether Yellen would signal further rate rises over the coming months.Phil Shaw, chief UK economist at fund manager Investec, said it was almost certain the Fed would raise rates, but the question for markets was whether Yellen would signal further rate rises over the coming months.
Related: The rate rise heard around the world: Janet Yellen prepares for her big decisionRelated: The rate rise heard around the world: Janet Yellen prepares for her big decision
More than £73bn was wiped off the value of UK shares last week after fresh falls in the price of copper and other metals was matched by a precipitous fall in the price of oil to below $38. London’s FTSE 100 closed 135.27 points down at 5,952.78 – its lowest level since late September.More than £73bn was wiped off the value of UK shares last week after fresh falls in the price of copper and other metals was matched by a precipitous fall in the price of oil to below $38. London’s FTSE 100 closed 135.27 points down at 5,952.78 – its lowest level since late September.
The index of Britain’s top 100 companies is now about 6.5% below its level at the start of the year, unlike the German Dax 30 and the Paris Cac 40, which are well above.The index of Britain’s top 100 companies is now about 6.5% below its level at the start of the year, unlike the German Dax 30 and the Paris Cac 40, which are well above.
A forecast from the International Energy Agency (IEA) that a glut of crude will persist for another year triggered panic selling among investors, already concerned that an interest rate rise will potentially destabilise the global economy.A forecast from the International Energy Agency (IEA) that a glut of crude will persist for another year triggered panic selling among investors, already concerned that an interest rate rise will potentially destabilise the global economy.
The Bank of England is expected to delay a rise in rates following a string of weak inflation figures. Official figures on Tuesday are expected to show that falling oil prices and intense competition among food retailers kept inflation near zero in November, adding to a year of flat average prices.The Bank of England is expected to delay a rise in rates following a string of weak inflation figures. Official figures on Tuesday are expected to show that falling oil prices and intense competition among food retailers kept inflation near zero in November, adding to a year of flat average prices.
Several Threadneedle Street policymakers have warned that the UK needs to begin raising rates to choke off cheap personal credit and rampant house price rises.Several Threadneedle Street policymakers have warned that the UK needs to begin raising rates to choke off cheap personal credit and rampant house price rises.
Unemployment data on Wednesday is expected to show a further strengthening of the employment rate, which is already at a record high, though skills shortages in some ares of the economy is likely to limit the extent of new hiring, according to some analysts. Unemployment data on Wednesday is expected to show a further strengthening of the employment rate, which is already at a record high, though skills shortages in some areas of the economy are likely to limit the extent of new hiring, according to some analysts.