Global markets slumped heavily on Wednesday afternoon as concerns about the eurozone coupled with the threat of the US fiscal cliff hit investor confidence.
At close, the FTSE 100 was down 1.6 per cent to stand at 5791.63. While in Europe, the French Cac 40 and the German Dax both fell by 2 per cent. The FTSEurofirst also dropped 1.3 per cent.
The falls come after economic growth forecasts from the European Commission were revised down. The European Commission now expects GDP in the eurozone to contract by 0.4 per cent in 2012 and rise by only 0.1 per cent in 2013.
Having seen early gains on the back of Barack Obama’s election victory investors quickly switched their focus to the threat the US ‘fiscal cliff’ with some $600bn of spending cuts and tax increases threatening to send the US back into recession next year.
There are fears Obama will struggle to reach a budget deal with a divided Congress.
At 16,56, the Dow Jones was down by 2.5 per cent in the first trading sessio since Obama’s re-election was confirmed.