The FTSE 100 hit a two-year low as fears of disintegration in US-China relations left the benchmark nursing its biggest daily drop since the Brexit vote.
A 3.2 percent deterioration in the blue-chip benchmark took the index back to levels last seen during the during the dot-com boom 18 years ago, in a sell-off that put the FTSE 100 on course for its worst year since the global financial crisis in 2008.
Similarly, the FTSE 250, which investors hold as more representative of the UK economy, could not avoid the trend and closed down 2.8 percent. The market having been spooked by the harm an enduring trade war could do to global economic prospects hitting share prices in the UK and abroad.
The precipitous deterioration in London-listed stocks came alongside the worst day for European equities since the direct aftermath of the 2016 Brexit vote. The broad Stoxx 600 index shed 3.1 percent, with Germany’s Dax falling 3.5 percent and France’s CAC 40 sliding 3.3 percent.
Sterling strength continued the pressure on UK stocks. With falls for the pound having counterbalanced political uncertainty earlier in the year and UK, stocks moved to record highs in May as expected as three-quarters of FTSE 100 constituents’ revenue comes from outside the UK.
But investors have decreased their bets on the probability of a no-deal Brexit in recent days after the European Court of Justice’s advocate general said Britain can rescind its notice to quit the EU without requesting agreement of other surviving member states.