London shares plunged 3 percent on Thursday after Federal Reserve Board chairman Ben Bernanke said the US central bank may begin winding down its massive stimulus programme later this year.
The benchmark FTSE 100 index sank 189.31 points to 6,159.51 points.
“In a classic case of perverse logic European markets were caught up in a vortex of selling today” after the announcement by the US Fed late Wednesday which was based on positive economic data for the US, said Michael Hewson, Senior Market Analyst at CMC Markets UK.
“The sell-off was given added momentum by rising concerns of a credit crunch in China as well as a simply horrible manufacturing PMI print, as concerns about the trajectory of Chinese growth continued to build up,” he said.
The Fed said on Wednesday that it would keep in place its $85-billion-a-month bond-buying programme, which is known as quantitative easing (QE), as unemployment remains high and growth in the world’s top economy was being held back by government spending cuts.
However, in a news conference, Bernanke said that the Fed’s policy committee “currently anticipates that it would be appropriate to moderate the monthly pace of purchases later this year” if the economic outlook continued to improve.
London-listed resources stocks were the worst affected, after the price of gold tumbled as low as $1,286.20 an ounce on the London Bullion Market, striking a point last seen in September 2010. Gold later recovered somewhat to $1,292.50.
Polymetal plummeted 11.96 percent to 541 pence, Fresnillo plunged 8.09 percent to 960.50 pence and Randgold sank 7.49 percent to 4,296 pence.
Fund manager Aberdeen Asset Management also had a bad day, tumbling 7.88 percent to 368.50 pence.
No stock in the blue chip FTSE 100 ended the day in positive territory.
On the currency markets, the pound weakened by nearly two cents to $1.5473 at 5:16 pm from $1.5661 on Wednesday evening, but edged up to 1.1706 euros from 1.682 euros the previous night.
London shares plunge on Bernanke comments
