The recent rally on London’s FTSE 100 Index came screeching to a halt amid fears that US policymakers are getting cold feet over their economy-boosting measures.
Falls were mirrored across Europe and on Wall Street after minutes of the Federal Reserve’s January meeting showed that a number of members were concerned about the cost and risks of carrying out further asset purchases under its quantitative easing programme.
With investors shocked by the report, the FTSE 100 closed 1.6% lower, down 103.8 points to 6291.5, having set a new five-year high on Wednesday on hopes the Bank of England will sanction more QE.
Sir Mervyn King’s vote in favour of more asset purchases at the Bank’s meeting earlier this month meant a big sell-off for the pound yesterday.
But there was a modest recovery after public sector borrowing figures showed a better-than-expected tax take in January.
While economists worried the bumper month would not be enough to prevent the UK from losing its AAA credit rating, sterling took heart from the figures - rising to $1.53 and 1.16 euros.
