The city has felt the full impact of a sell-off in global financial markets with shares of the FTSE 100 index of leading companies now over 10% below the record high in May.
On a second day of turbulence, Wall Street's panic shocks rippled through Asian and European stock exchanges while dealers frightened commercial tensions, the prospect of higher inflation and Donald Trump's attempts to pressurize the US central bank on interest rates.
The FTSE 1
. Even the steepest falls were observed in Asia during the night of Wednesday. The Nikkei index in Tokyo lost 4%, while Hang Seng in Hong Kong fell by 3.8% and the Shanghai market fell 5.2%. The equity markets in Paris, Frankfurt and Milan fell more than 1% on Thursday and a large proportion of global equities – the FTSE index all over the world – fell to the lowest level from November 2017.
US inflation data better than expected failed to strengthen sentiment in New York, although the modest rise in the cost of living has eased pressure on the Federal Reserve to increase the cost of the loan. Bond yields – a measure of the interest rate that the US government must pay on borrowing money – fell for a second day.
News that US core inflation – excluding volatile items like food and energy – had remained unchanged at 2.2% provided Trump with new evidence to attack the US central bank. The Fed, the president insisted, was making "a serious mistake" with its ever-increasing interest rate policy.
Trump said he had no intention of dismissing Jerome Powell – the man who had appointed the Fed chairman – but was disappointed with the bank's policies. He added that the central bank – which has raised interest rates eight times under Powell and Janet Yellen since 2015 – was out of control and too strict.
Since becoming president, Trump has repeatedly cited a rising stock market as evidence that his economic strategy was leading to more growth and more jobs. Speaking of how Wall Street had a new period of nervousness, the president said: "It's a correction that I think is caused by the Fed and interest rates, the dollar is very strong, very powerful – and causes difficulties in doing business. "
The tightening of relations has begun to relate to markets, which expect the Fed to return to policy in December and continue to raise rates up to four times in 2019.
In the early trading days of Wall Street, the Dow Jones industrial average – the index of the 30 largest US companies – was more than 300 points less in a phase before setting up a partial rally. The technology stocks, which have borne the weight of sales on Wednesday, recorded slight gains.
Oil prices were also lower, with a sentiment that was affected by both stock prices and news on the rise in US crude stocks. Brent crude futures – the benchmark for the global market – were lower by $ 2 to just over $ 81 a barrel.
"The bloodshed for global actions comes as investors adjust to a world of higher US interest rates," said Jasper Lawler, the online trading company London Capital Group. He added that investors were changing bets on so-called growth stocks, such as Facebook or Amazon, to "more conservative strategies".
Trevor Greetham of the fund manager Royal London Asset Management said: "It is not surprising to see a sharp increase in volatility given the negative cross currents for the markets, global growth is slowing, US interest rates are rising and Trump's commercial war rhetoric is making itself heard before the mid-month elections next
"In the long run, we expect economic expansion to continue in 2019 and this should ultimately push up markets equity. Investors should note that US tax cuts and spending increases continue to fuel, interest rates in other parts of the world are very low and China is loosening its policy to offset the fears of commercial warfare. "