Stock Market Bloodbath As Fed Hikes Rates

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The stock market bloodbath continued today as the FTSE plunged further into the red.

At one stage, the index looked as if it was going to plunge below the 7,000 mark, but rallied from a low of 7,008 to a day high of 7,145.

But London was just one of a chain of markets, including the New York Dow that experienced a slump.

The root of the problem seems to be the US Federal Reserve announcing interest rates in the States are likely to keep on rising faster than expected.

Hiking the rate means consumers and businesses will pay more for credit, which investors fear will put the brakes on an expanding economy by leading to higher debt, increased interest payments on credit and lower profits as the costs of production increase.

Fed is crazy, says Trump

The current Fed rate is 2.25% – the highest level since 2008.

President Donald Trump, who has no political control over the rate setters, has labelled the hike and notice of further rises as ‘crazy’.

“I think the Fed is making a mistake. They are so tight. I think the Fed has gone crazy,” he said.

The Fed announcement triggered an 800 point drop in the Dow Jones Industrial Index in just 24 hours.

Trump observed the plunging stock prices were not unexpected.

“Actually, it’s a correction that we’ve been waiting for a long time, but I really disagree with what the Fed is doing,” said Trump.

Looming trade war

Another event troubling investors is the looming trade war between the US and China.

Although outsiders may feel the problems may not trouble the rest of the world, the fact is China buys a lot of raw material and machinery from the rest of the world, and a slowing economy will impinge on this outlay.

The result is the general world economy will feel a shudder from the China slowdown.

Another factor influencing the UK and European markets is Brexit.

The fast approaching March 29 Brexit deadline and no signs of an agreement between the EU and Britain is a worry for business and investors that has not gone away over the past two years.

No doubt both sides will forge a deal at the last minute, but that does not encourage investors for the time being.

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