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FTSE closes in the red as UK braces for first national rail strike in 25 years

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·3-min read
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The FTSE 100 fell in the red as markets struggle to rebound from last week's sell-off. Photo: Reuters/Henry Nicholls
The FTSE 100 fell in the red as markets struggle to rebound from last week's sell-off. Photo: Reuters/Henry Nicholls

European stocks sank in a sea of red on Tuesday as Britain faces its first national train strike in over 25 years, adding more pressure on commuters who already face travel chaos over the Summer holiday period.

The FTSE 100 (^FTSE) slumped 2.8%, France’s CAC (^FCHI) tumbled 2.7% on the day, and the DAX (^GDAXI) dipped 2.6% in Frankfurt.

UK train drivers are set to vote on their first national strike since 1995 as walkouts over pay threaten to bring Britain's travel sector to another standstill.

Aslef, the drivers’ union, will ballot on industrial action at 10 train firms to coincide with similar action by the Transport Salaried Staffs’ Association (TSSA), which represents station and ticket office workers.

Speaking to the Financial Times, Mick Whelan, head of Aslef, warned of "massive" disruption, adding "It will be far more disruptive than it has been in the past. We do not go on strike very often."

This follows last month's strike by the Rail, Maritime and Transport (RMT) union, which sparked the biggest disruption on British railways in a generation.

Meanwhile, protesters have been blocking parts of the motorway network on Monday over high fuel prices, intensifying the disruption caused by rising inflation.

Read more: Four in 10 travel insurance policies offer no cover for cancellations caused by strikes

The euro (EURUSD=X) tumbled to 20-year low against dollar as investors scaled back bets on further interest rate hikes from the European Central Bank amid a growing threat of recession.

The single currency fell as much as 0.9% to $1.033 – its weakest level since December 2002. It has declined more than 8% so far this year.

Money markets pared their bets on further rate rises after France's services PMI was revised lower on Tuesday. The pound (GBPUSD=X) also fell against the dollar, shedding 0.4% to $1.205.

Chart: Yahoo Finance
Chart: Yahoo Finance

"The euro is in dire straits now as the central banks is so far away from its objective and now has an even bigger problem in terms of fragmentation," said Neil Wilson, chief market analyst at Markets.com. "Unless the ECB gets its act together it could be at parity soon."

Tuesday's downturn also hit commodities, with copper (HG=F) dropping to its lowest level in 17 months, as global recession fears hit the market.

Across the Atlantic, US benchmarks followed European stocks into the red as traders return after the Fourth of July holiday with a focus on the dual threat of surging inflation and a looming recession.

Wall Street’s S&P 500 (^GSPC) lost 77.15 points, or 2%, to 3748.18. The tech-heavy Nasdaq (^IXIC) fell 1%, while the Dow Jones (^DJI) was down 2.2% at London's close.

"US traders have dragged Europe back into the red, and a slump in commodity prices has meant the FTSE 100 is leading the charge down," said Chris Beauchamp, chief market analyst at online trading platform IG.

"This recurrence of selling has put indices across the board into the red, as growth and inflation fears return right on cue."

Read more: Ukraine war: UK announces fresh economic sanctions on Belarus

Asian stocks were mixed overnight as a growing coronavirus outbreak in the eastern province of Anhui rekindled worries of further lockdowns in the world’s second-largest economy.

In Tokyo, the Nikkei (^N225) added 1.1%, while the Hang Seng (^HSI) edged 0.1% higher in Hong Kong and the Shanghai Composite (000001.SS) was muted in China.

It came as US president Joe Biden is reportedly preparing to wind back some of the tariffs imposed on Chinese goods by his predecessor Donald Trump.

Watch: Why are gas prices rising?

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