FTSE plunges as fears of tariff induced recession mount
- Goldman Sachs ups odds of US recession from 35 to 45%
The FTSE 100 plummeted on Monday as investors continued to run for cover amid fears an emerging trade war will spark a recession.
The blue chip index closed down 4.38 per cent or 352.90 points at 7,702.08, joining the sell off across Asian, European and US markets.
Hopes US President Donald Trump will back down on his sweeping tariff plans are quickly fading, despite growing fears the White House could drive the world’s biggest economy into contraction.
Stocks went into freefall last week as the White House unveiled harsher than expected tariff measures on imports from all over the world, prompting retaliatory measures from other nations – most notably China.
Trump told reporters over the weekend investors would have to ‘take medicine to fix’ what the White House perceives as an ‘unfair’ trade environment, adding that he would not do a deal with China until the US trade deficit was addressed.
Goldman Sachs on Monday raised the odds of a US recession from 35 to 45 per cent in the next 12 months, joining other investment banks in revising their forecast.
The bank pointed to a sharp tightening in financial conditions and a rise in policy uncertainty that is likely to depress capital spending by more than what Goldman had previously assumed.
FTSE down: Trump told reporters over the weekend investors would have to ‘take medicine to fix’ what the White House perceives as an ‘unfair’ trade environment
Principal Asset Management estimates that Trump’s tariffs will result in a 2.4 per cent hit to US economic growth and boost inflation as much as 1.4 per cent.
Christian Floro, market strategist at Principal AM, said the tariffs will have a ‘severe’ impact on consumers, and ‘odds of a US recession are higher as a result’.
He added: ‘Slowing growth and rising inflation create an increasingly uneasy macro environment that resembles stagflation, even if it doesn’t fully meet the definition. This mix only adds complexity to the policy outlook.’
Top 100: The biggest fallers as markets grapple with the prospect of a global trade war
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