The MSCI World Equity Index has fallen more than 20% so far this year, in the sharpest drop in the first half since its inception, leading to a dip in loss-making tech companies as investors panic over the end of extremely low interest rates. In the UK, the FTSE 100 fell 1.96% on Thursday to close its worst month since the early days of the Covid pandemic. All but ten shares closed in the red, reducing the value of blue chip companies by £ 50 billion, amid fears that the country will suffer the most severe recession in Europe. It came after official figures revealed that British households suffered the biggest drop in disposable income ever, with a 1.3% year-on-year decline through March 2022. Paul Dales, chief UK economist at Capital Economics, said: “While GDP and consumer spending will not fall as much as real incomes, it is quite clear that the economy will be very weak for a while. “The recession is a real danger.” Wall Street also suffered heavy losses on Thursday, as fears of a slowdown were exacerbated by data showing that US inflation-adjusted consumer spending fell in May for the first time this year. The S&P 500 benchmark fell 0.9% while the Nasdaq heavyweight fell 1.3%. The S&P 500 has lost 20% so far this year, marking its worst first half of the year since 1970 and its worst performance in two quarters since the 2008 financial crisis. The Nasdaq recorded the biggest drop ever in the same period, losing $ 5.4 trillion in value. Investor concerns intensified this week as top central bankers reiterated their commitment to raising interest rates to counter rising prices fueled by Russia’s war in Ukraine. Andrew Bailey, Governor of the Bank of England, warned that Britain was facing a faster and sharper recession than other rich countries, but promised to act “more vigorously” if high inflation – currently projected to peak at 11% in October – continue. Jerome Powell, chairman of the Federal Reserve, insisted he would not allow the US economy to slip into a “higher inflation regime.”
