The prospect of the US central bank raising interest rates as early as next month is giving UK investors the heebie-jeebies today.
Although a more than 50% chance of a hike was already expected in September, the prospect of higher credit costs three months sooner spooked US markets yesterday, and today it is the turn of the UK's blue-chips .
The Fed's statement after the decision in April to leave rates unchanged ran against the grain of what the minutes, released earlier, suggest in terms of the timing of a rate hike.
Just as US weather forecasters are fond of giving a percentage chance of rain, so market pundits are now ascribing a percentage chance of a rate hike in June, and the number has risen above 30% from close to zero a month or two ago.
Paul Donovan, an economist at UBS, still reckons September is the most likely month in which the Fed will pull the trigger, as it will want to see a few months' evidence of improving growth.
“Nonetheless this is finally getting markets to pay attention to what economists are saying,” Donovan said, sticking up for his profession.
“The Fed minutes did acknowledge the UK referendum as a market risk. One poll (yesterday) showed a 55%:37% yes (remain):no (leave) split. The larger than normal lead for "yes" came when undecided voters were asked to indicate their preference, showing the importance of the 'apathetic majority',” Donovan noted.
The FTSE 100 was down 71 points, or 1.2%, at 6,094, with much of the damage being done by the mining giants, though poorly received results from Royal Mail PLC (LON:RMG), down 5.5%, have added to the woe.
In contrast, the banks have responded well to the prospect of rising interest rates, with Standard Chartered PLC, Royal Bank of Scotland Group PLC, Barclays PLC and Lloyds Banking PLC the top four risers on the Footsie.
Proving that London's junior market is quite capable of ploughing its own furrow, the FTSE Aim 100 was up three points (0.1%) at 3,385 while the broader-based FTSE Aim All-Share was a quarter of a point heavier at 725.
An upbeat annual general meeting statement from ProPhotonix Limited (LON:PPIX) sent the shares a halfpenny higher to 3.5p.
The designer and manufacturer of light-emitting diode (LED) illumination systems and laser diode modules revealed it has received production orders in 2016 from three customers who had signed three-year supply agreements during 2015.
Kibo Mining PLC's (LON:KIBO) shares shot up almost 19% as it took another step towards a bankable feasibility study for its Mbeya coal to power project in Tanzania, as the first phase of the environmental and social impact assessment has now been completed.
Top level internet names specialist Minds + Machines Group Ltd (LON:MMX) is no longer being pursued by Fred Krueger (no, no that one).
The former executive chairman and co-founder of Minds + Machines and fellow plaintiffs have dropped their lawsuit against the company relating, in the main, to 5mln shares issued to him in 2007.
On the downside, shares in ValiRx Plc (LON:VAL) were under the weather, losing almost a fifth of their value, as the company said manufacturing of VAL401 had begun ahead of a phase II clinical trial of the drug in patients with advanced lung cancer.
The study will assess efficacy, safety and tolerability in people with the non-small cell variant of the disease where at least one form of chemotherapy has failed.
Broker Northland said: “After today’s announcement, ValiRx is a step closer to commencing its second clinical programme, VAL401. With manufacturing lined up, sufficient clinical trial supplies should soon be ready to commence dosing patients. Due to VAL401’s established safety profile, ValiRx expects to fast-track the programme straight into a Phase 2b trial.”
Also on the slide was 2016 stock market star Strategic Minerals PLC (LON:SML), after the company said it had started drilling at Hanns Camp.
Excitement has been mounting ever since the company announced the intention to start drilling at the nickel/copper sulphide prospect in Australia, with the share price more than tripling over the last month, but it was a case of “buy on the prospect, sell on the fact” today with the shares off 19%.
Snapshot
FTSE 100 dipped almost 1% as expected to 6,113, down just over 52 points as Wall Street wariness spreads across the pond.
Following a strong balance sheet, the top winner was 3i Group PLC (LON:III) at 497.70p, up 2% or 10 points.
Fresnillo PLC (LON:FRES) was the biggest faller at 1090p, down 54 points or just under 5%, after negative rating by broker.
German drug and chemicals-maker Bayer AG has made an unsolicited offer to buy out agriculture giant Monsanto Company, which would create the world's largest supplier of seeds and pesticides. None of the financial details have yet been disclosed.
Asian stock markets fell after the latest minutes from the Federal Reserve indicated it could raise interest rates as soon as June, if the conditions were right.
South Korea's Kospi fell 0.5% to close at 1,946.78 while Australia's S&P/ASX 200 ended 0.6% lower at 5,323.30.
Hong Kong's Hang Seng index fell 0.6% while the Shanghai Composite was flat.
Analysts believe the probability of a US rate rise in June has now increased to 32%, according to CMC Markets.
Preview at 6.48am
London’s FTSE 100 is expected to open nearly 1% lower on Thursday as wariness spreads across the Atlantic.
In US markets the conversation remained on Janet Yellen and the Federal Reserve following the release of minutes from the April committee meeting, which revealed most members were ready to make interest rates rise.
Equities had been pushing session highs just before the minutes, and enthusiasm was lost soon after.
The Dow Jones ended flat, closing three points lower at 17,526. Similarly, closing at 2,047 the S&P 500 was just a couple of points from the previous day’s price.
The Nasdaq, meanwhile, kept hold of some gains to finish the session 0.5% higher at 4,739.
In Asia, Japan’s Nikkei was just a few points into positive territory at 16,657. Hong Kong’s Hang Seng was down 0.44% to 19,735 but the Shanghai Composite gained 0.5% to 2,822.
Australia’s ASX 200 was down 0.7% at 5,319.
In commodity markets crude prices start on the back foot, with Brent pulling back around 2% to around US$48.15. Gold was priced at US$1,254 an ounce.
Here, in London, spread betting and CFD group IG Markets sees the FTSE 100 almost 1% lower, calling the benchmark down 59 points at 6,106 to 6,111 just over an hour before Thursday’s open.