“Black Monday” stock market crash: What happened and how much trouble is Britain in?

FTSE 100 lost a massive £75bn this morning

The FTSE 100 plummeted 12% this morning after five hours of trading (updated 1pm), with a huge £75bn wiped of the value of the index.

Oil prices have plunged to six-year lows, and markets in Germany and France lost 3% in the opening two hours of trading, in what traders are calling “Black Monday”. Markets in Hong Kong, Tokyo and Sydney all dropped by more than 4% on Monday.

European stocks are in their worst monthly decline since October 2008 at the height of the economic crisis.

What happened?

The problems in the global market today originated in China. Chinese stock exchange the Shanghai Composite wiped off its entire year of gains overnight, closing down 8.5% - its worst in eight years.

Since June, the index has fallen 30%, with 12% of this in the last week, prompting weekly losses of 6% and 5% in the Dow Jones and the FTSE 100 respectively.

Analysts had been warning about the stability of Chinese markets after data showed a slowdown in China’s economy, prompting fears of a China-led global slowdown.

Authorities in China attempted to stabilise the market by putting the main state pension fund into the Shanghai Composite, however it seems to have failed to reassure traders and investors.

Unlike the UK, US or other global markets, 80% of China’s investors are individuals rather than companies.

How much trouble is Britain in?

This morning the FTSE 100 saw no rises, with the biggest falls in Glencore and Anglo American, both down 5.6%.

The FTSE 250 is also 2.5% lower, with the biggest faller mining company Lonmin down 7.2%.

Stefan Worrall, cash equities manager at Credit Suisse, told the media: “It’s a bit like walking across a minefield at the moment, so people are treading carefully, as they should.”

The US markets are set to open later today, with the NYSE opening at 2.30pm GMT, so the full effect of China’s crash on UK markets will not be apparent until after then due to the huge global influence of US markets.

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