The FTSE 100 suffered a substantial setback yesterday, losing £27 billion in value amid a wave of market turmoil driven by global sell-offs, concerns over artificial intelligence (AI) stock valuations, and uncertainties surrounding the UK government's Budget plans. London's leading share index closed down 1.1 percent, or 109 points, at 9698, marking its worst single-day fall since April, a period previously unsettled by trade war fears.
This sharp decline was part of a broader global sell-off that began on Wall Street, where investors reacted to worries about rising US interest rates and a potential bubble forming around AI stocks. Technology giants, notably Nvidia, which has at times been valued at over $5 trillion, have seen significant share price volatility. Nvidia’s stock dropped 4 percent but experienced some recovery subsequently. Market analysts, including the Bank of England, have cautioned that current valuations resemble the dotcom bubble of the late 1990s, raising fears of a damaging market correction if the AI enthusiasm diminishes.
In London, heavyweight financial firms bore the brunt of investor anxiety, with NatWest shares down nearly 4 percent and Barclays dropping more than 3 percent. Banks are increasingly nervous about the possibility of new tax measures following the Chancellor Rachel Reeves' Budget announcements. Initial reports had suggested banks might be spared from tax increases; however, speculation intensified after a government reversal on income tax policy, adding to market uncertainty. Alongside banks, the gambling sector also faced significant declines, Ladbrokes owner Entain fell nearly 4 percent, while the owner of William Hill, Evoke, plunged 5 percent, as investors speculated that this industry could become a target for increased taxation now that income tax hikes have been ruled out.
Dan Coatsworth, head of markets at AJ Bell, described the market sentiment as a contagion spreading from Wall Street across European and Asian markets. He noted that investors are not only concerned about overvaluations in AI but also about the broader economic outlook, especially given signs of fragility in the jobs market. This compounded with the UK's political unpredictability, particularly the sudden changes to the Budget plan, spooked both equity and bond markets, contributing to the FTSE’s steep losses.
The impact of the sell-off extended beyond equities. Bitcoin, often seen as a barometer of risk appetite in financial markets, plunged below $95,000, a level not seen since May, highlighting a broader retreat from riskier assets amid the global uncertainty. Asian markets followed suit with notable declines; Japan’s Nikkei and Hong Kong’s Hang Seng both fell by nearly 2 percent overnight, reflecting widespread investor caution.
Overall, the FTSE 100’s £27 billion loss illustrates how interconnected global financial markets are to technological sector valuations and domestic policy signals. The unfolding situation underlines the delicate balance that policymakers must strike to maintain market confidence while addressing fiscal and economic challenges. Investors remain wary of the potential for further volatility, particularly as questions around AI’s long-term economic impact and government fiscal strategies continue to evolve.
📌 Reference Map:
- [1] (Daily Mail) - Paragraphs 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12
- [2] (Financial Times) - Paragraph 1
- [3] (BBC News) - Paragraph 1
- [4] (Reuters) - Paragraph 1
- [5] (The Guardian) - Paragraph 1
- [6] (CNBC) - Paragraph 1
- [7] (Wall Street Journal) - Paragraph 1
Source: Noah Wire Services