After Wall Street closed with its largest crash in one day since 2008 on Monday, a similar fall took place on Tuesday morning as investors continued to sell off their shares. London’s FTSE was down 2%, while Frankurt’s DAX and Paris’ CAC were down 2.2% and 2% respectively. Meanwhile, Japan’s Nikkei 225 closed down 4.7% and Hong Kong plummeted 5.1%.
The sell-off began last week after data in the US showed stronger wage growth, which raised expectations that US interest rates might start to rise more quickly to tackle inflation. When interest rates rise sharply, stocks often fall. Higher rates can eat into corporate profits. Rising rates and inflation can also cause problems in bond markets.
Analysts are trying to figure out if it’s a short-term correction for markets that had recently hit record highs or a sign of deeper concerns. Experts have warned repeatedly in recent months that both stock and bond markets were getting too hot, and some analysts say the current losses could even be a good thing.