Global stock markets tumbled into the red on Thursday, with the S&P 500 (^GSPC) down around 1%, on track for the worst first half of the year since 1970.
European stock markets were also deep in negative territory on the day, slumping further after the bell on Wall Street.
In London, the FTSE 100 (^FTSE) fell 2% on the day, with all but one company on the bourse slumping into the negative territory after opening, while the CAC (^FCHI) tumbled 2% in Paris, and the DAX (^GDAXI) was also 1.5% lower in Germany.
London's benchmark index is on track for the biggest monthly loss since March 2020, and its first quarterly loss since September of the same year.
It came as UK household incomes fell for a fourth consecutive quarter at the start of the year, marking the longest run of declines since 1955.
Prime minister Boris Johnson and chancellor Rishi Sunak are facing calls to do more to help families cope with the cost of living squeeze and soaring inflation.
Elsewhere, UK business confidence tumbled to the lowest level since last year's lockdown in March. Lloyd Bank said on Thursday that confidence fell 10 points to 28% in June, the lowest in 15 months.
Wall Street was weighed down on Wednesday after US Federal Reserve chair Jerome Powell spoke at an ECB Forum panel. The S&P 500 index is on track to end the first half of the year with the biggest percentage drop since 1970, while the Nasdaq Composite was set for its largest declines ever during the same period.
“Central bank comments did little to alleviate the gloom from markets, resulting in mixed performances and a continuation of the difficult outlook,” Richard Hunter, head of markets at Interactive Investor, said.
“At the ECB forum in Portugal, the Federal Reserve maintained that its primary objective remains on reining in inflation, although conceding that this could come at the cost of recession.”
It also came as more Americans filed new unemployment claims than expected last week, although the total remains low by historic standards. There were 231,000 initial claims filed a week ago, marginally higher than forecast.
The previous week’s data was revised up to show 233,000 claims, as investors look for signs of a slowdown in the jobs market.
Elsewhere, a closely watched gauge of US price rises rose 0.6% in May largely due to the higher cost of gas and food, up from 0.2% in April. But the core personal consumption price index, which strips out volatile food and energy costs, rose by 0.3%, below forecasts.
Stocks in Asia were mixed overnight after US stocks ended flat. Encouraging gains in factory and services activity in China were partly offset by some disappointing industrial output from Japan.
Of late, any gains have been tentative, despite a potentially recovering Chinese economy and the stated willingness of the authorities to assist economic growth if necessary.
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