The FTSE 100 took a £27billion hit yesterday as markets were battered by fear and confusion over the Budget and a wobble in artificial intelligence stocks.
London’s blue-chip share index closed 1.1pc, or 109 points lower at 9698 points.
The FTSE was caught up in a global sell-off which began on Wall Street a day earlier when New York stock markets slumped.
And the uncertainty caused by Labour’s income tax U-turn added to the mayhem.
Heavyweight financial firms were among the worst hit with NatWest falling nearly 4 per cent and Barclays by more than 3 per cent.
Banks are among firms worried that they may be targeted for a tax raid in the Chancellor’s Budget – although recent reports, prior to the latest U-turn, suggested they would be spared.
Rachel Reeves is also said to be eyeing up the gambling sector – a prospect which might be thought even more tempting now that an income tax grab has been ruled out.
Ladbrokes owner Entain fell nearly 4 per cent and William Hill owner Evoke sank 5 per cent.
Banks are among firms worried that they may be targeted for a tax raid in the Chancellor’s Budget – although recent reports, prior to the latest U-turn, suggested they would be spared
Dan Coatsworth, head of markets at AJ Bell, said: ‘Wall Street gloom has spread across European and Asian markets like a contagious disease.
‘Markets are down across the board as investors fret about cracks in the narrative that’s driven the mother of all tech rallies over the past few years.
‘Investors are worried about rich equity valuations and how billions of dollars are being spent on AI just at a time when the jobs market is looking fragile.
‘Investors in the UK have their own issues to process, let alone whether there is a potential AI bubble waiting to burst.
‘Speculation that Chancellor Rachel Reeves has ripped up part of her Budget plan only days before the big event has spooked the bond market.’
Elsewhere, the wider global sell-off saw Bitcoin come under pressure, falling below $100,000 on Thursday and yesterday tumbling further to less than $95,000, the lowest since May.
The initial slump in America was blamed on worries about US interest rates as well as concerns over an AI ‘bubble’ in tech company shares.
It was followed by steep falls overnight in Asian markets, with Japan’s Nikkei and Hong Kong’s Hang Seng down by nearly 2 per cent.
UK and European stocks later joined in the selling but London’s slump was the most pronounced – with the FTSE at one stage down by 2pc or nearly 200 points.
It later fought back but yesterday’s decline was still the worst one day fall since April – a period when markets were gripped by fears over Donald Trump’s tariff plans.
The fall meant that £27billion was wiped off the combined value of the UK’s 100 biggest listed firms in a single day.
The initial slump in America was blamed on worries about US interest rates as well as concerns over an AI ‘bubble’ in tech company shares (file photo)
US stocks opened sharply lower again yesterday though later clawed back losses.
It comes after sceptics began to question optimism over AI companies which has helped power Wall Street to a series of record highs.
Chip maker Nvidia, the world’s most valuable company, has been valued at more than $5 trillion (£3.8 trillion) at its highest point. Its shares fell 4 per cent on Thursday but were up again yesterday.
Critics fear the AI surge could amount to a bubble, creating damaging consequences should it burst.
The Bank of England last month warned that valuations ‘appear stretched’ and drew comparisons with the past mania for ‘dotcom’ stocks which went sour 25 years.
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Budget shambles and a global AI ‘wobble’ wipes £27billion off the value of FTSE 100