FTSE loses 5% of its value in a single day

by Richard Kilner

Story link: FTSE loses 5% of its value in a single day

Yesterday saw the FTSE lose 5.5% of its value as it recorded a fall of over 300 points, the largest drop in a single day since the terrorist attacks of 9/11.

In Paris and Frankfurt the stock exchanges lost approximately 7%.

In the US the Dow Jones was closed for the day due to the Martin Luther King holiday.

Opinion is united on how dire the day’s trading was, but is divided over the future prospects.

Some believe that the stock market will bounce back as buyers snap up shares at low prices, whilst others fear yesterday was the clearest omen yet of a prolonged period of economic difficulty.

The Royal Bank of Scotland was particularly hard hit, losing 8% of its value, £8bn.

Greg Feehely of Altium Securities has stated should the US tip into recession, as is feared, and other countries should follow suit it is unclear who would purchase the cheap goods the Chinese economy has been mass producing.

The knock on effect could be a downturn in Chinese demand for raw materials, which would hit mining firms hard.

Low prices do afford opportunities however, as noted by Giles Derry of Dunedin Capital Partners.

Derry believes that private equity firms such as his own could benefit from low share prices.

Yesterday’s turbulence will guarantee that the spotlight will be on the Dow Jones as it opens today.