New Crisis Looming? FTSE, Dow Latest Drops Indicate Global Volatility - Scholar

London's stock market has tumbled to a two-year low amid fears of a global trade war and Brexit gloom. Investors have been selling off shares, sending the FTSE 100 index down by 3.15 percent - its lowest level since December 2016.

With more on this story, Sputnik spoke to Nafis Alam, Associate Professor of Finance at the University of Reading Malaysia about the latest developments.

Sputnik: Looking at these moves, have we the FTSE 100 be this volatile before?

Nafis Alam: This is a global scenario at the moment; if you look, the same thing happened to Dow Jones on the same day where Dow fell by around 700 points.

It’s not just a UK problem it’s about the global market volatility issue and that is being compounded by many factors. Definitely the US, China trade war is one of the factors, and if you see oil prices they are looming too.

I will not completely blame Brexit for this downfall, it was a global market reaction to a few things happening and if I recall I wrote a couple of months ago the new crisis is looming, the market is going for a correction… these are short term corrections at the moment and we can expect similar corrections happening over the next few months.

Sputnik: Should investors, both small and large, be worried about these moves surrounding the FTSE 100?

Nafis Alam: Definitely. The time is to reconcile or to look at portfolios because the market is going to become very volatile given all of these factors we discussed earlier; the trade war and Brexit which will definitely have an effect.

The UK will face a larger impact compared to other markets but overall the global market is primed for some type of crisis in the next few months. If the G20 or the global leaders don’t come forward to control the tensions between US and China it will have an effect on emerging markets and that will have a continuing effect in the world markets. It’s not just the UK markets, it’s a global affair.

Sputnik: If we look back to 2008, we saw massive economic downturn following similar movements we’re seeing now. Could the same thing? Is this a blip or something more serious, harking back to 2008 for example?

Nafis Alam: Many investment banks as well as economists are predicting this in the second half of 2019 or the early months of 2020. The market is very volatile and that will have a very large effect.

Things are building up… you can see that the markets are having issues, the banks are going to have problems, currencies are depreciating, emerging markets are having issues, China and India are slowing down… these are the signs. You can even see in the US that one US market is going down too.

These are the indications showing that but it’s not necessarily the same type of reaction, it could be a different type of reaction this time around, it’s not going to be a property bubble but might be more focused on commodities and the currency market depreciation which will have an impact on the banking sector as well.

Views and opinions expressed in this article are those of Nafis Alam and do not necessarily reflect those of Sputnik.