Nearly £50bn wiped from FTSE 100 after shares across the globe tumble
Nearly £50 billion has been wiped from the FTSE 100 as it fell victim to a global stock market sell-off.
The worldwide fall was sparked by fears rising inflation could force central banks to rise interest rates.
But as ITV News Business Editor Joel Hills explains, the trouble on the stock market does not necessarily mean the economy is in trouble.
In fact the global economy is doing well, and it is precisely because an economic upswing is underway that investors are rattled.
The general consensus is that this is a market correction, not a crash.
London's blue chip index ended the day down 2.6% or 193.58 points at 7,414.4 points - marking its lowest close since April 2017 - a decline mirrored by both the German Dax and French Cac 40 - which each dropped 2.3%.
It adds to deep losses during Monday's session when more than £27 billion was wiped off the value of London's blue-chip stocks and followed a brutal overnight sell-off in Asia and on Wall Street, where the Dow Jones Industrial Average and the S&P 500 dropped 4.6% and 4.1% respectively on Monday.
Tokyo's Nikkei 225 Day closed down 4.7%, while the Hong Kong's Hang Seng Index plunged 5% lower.
US stocks continued their descent after markets opened on Tuesday.
Sinking figures were also recorded in China (2.2%) and South Korea and Australia, which both skidded 2.9%.
The percentage drop in Australia was large enough to wipe out four months of gains.
Investors say they had been bracing for corrections of up to 10% after a bullish couple of years.
The slump began on Friday as investors are worried that creeping signs of higher inflation and interest rates could derail the US economy.
Many believe that rising inflation might push the Federal Reserve to raise interest rates more quickly, which could slow down economic growth by making it make it more expensive for people and businesses to borrow money.
Monday's drop saw Dow Jones fall by 1,175 points, erasing many of the gains from the start of the year.
Banks were hit hard, with bond yields and interest rates nosediving, while health care, technology and industrial companies also took losses.
Despite the fall, the White House said that long-term economic fundamentals "remain exceptionally strong".
David Kelly, from JP Morgan Asset Management, described the fall as being "like a kid at a child's party who, after an afternoon of cake and ice cream, eats one more cookie and that puts them over the edge".
He said that the signs of inflation and rising rates were not as bad as they looked, but after the market's big gains in 2017 and early 2018, stocks were overdue for a drop.