The UK FTSE 100 index plunged 3.5 percent on Wednesday closing at 5,673.58 points, after briefly touching a three-year low of 5,639.88.
The blue-chip equity index, which has already dropped over 9% in the first few weeks of the year, is now in a bear market – it has fallen by more than 20% off its intraday peak last year.
The last time the UK FTSE 100 entered a bear market was in 2009 – at the height of the Great Recession.
Chris Beauchamp, of IG, was quoted by The Telegraph as saying: “FTSE bears have been enjoying themselves today. The UK market has not been alone, as Europe and now the US join in with the panic of January 2016.
“Bond yields are heading lower too as investors shun risky assets and stash their money in any safe place going. The main driver of the falls continues to be oil, which has pushed onwards to fresh lows, taking oil stocks with it. A fresh downgrade to IMF growth forecasts underlines what stock markets are telling investors – that things are looking gloomy across the board.”
The UK’s leading mining and energy stocks have been hit by a slowdown in the Chinese economy and a price slump in the oil and commodities market.
Wednesday’s plunge came following a warning issued by the International Energy Agency stating that the oil market could “drown in oversupply”.
Brent crude oil traded at a 13-year low of just over $27 a barrel on Wednesday – the lowest level seen since 2003.
Royal Dutch Shell was among the biggest losers of the day, down 7.03%, after its preliminary fourth quarter earnings report revealed that it only expects profits of between $1.6 billion and $1.9 billion during its fourth quarter – representing a 42% decline.
UK FTSE 100 companies that posted losses of more than 6% on Wednesday:
- Glencore – down 9.85% to 71.20p
- Anglo American – down 7.43% to 221.05p
- BHP Billiton – down 7.37% to 580.90p
- Carnival – down 6.11% to 3,505.00p
Other major markets across the world which are now in a bear market include China, Germany, Canada, France, and Japan.