UK stocks recoup losses after turbulent week in the City amid US recession fears

UK stocks recouped losses after a turbulent week in the City amid fears of a US recession.

Investor jitters about a slowdown in the world’s largest economy triggered the chaos, which was accelerated by rising interest rates in Japan and concerns about overvalued technology stocks.

But the FTSE 100 managed to recoup its losses and closed yesterday up 0.3 per cent, or 23.13 points, at 8,168.1.

London’s blue-chip index has risen 1.75 percent, or 140.36 points, over the past five days.

Key economic data due next week – including inflation figures from the UK and US – could cause further volatility in global markets. Official figures showing US employers added fewer jobs in July than expected kicked off the week’s stock market slide.

Investors panicked over data suggesting a slowing U.S. economy, leaving the Federal Reserve, the country’s central bank, facing accusations that it had left interest rate cuts too late.

Adding to fears about the health of the U.S. economy, a surprise rate hike in Japan last week added to the market turmoil.

The Bank of Japan’s rate hikes prompted traders who had borrowed in yen while interest rates were low to rush to unload their investments and repay their debts. The Japanese stock market suffered its biggest one-day drop since 1987 on Monday. But Tokyo’s benchmark Nikkei 225 index closed Friday up 0.56 percent and was down just 0.47 percent for the week.

Wall Street suffered after large-cap technology stocks took a hit amid fears they were overvalued.

But they rebounded Thursday after new labor market data showed jobless claims fell more than expected last week.

Overall, in early trading, New York’s major indices pared losses: the S&P 500 gained 0.7%, the Dow Jones Industrial Average rose 0.4% and the tech-focused Nasdaq gained 0.7%. Investors are awaiting next week’s figures on U.S. consumer prices and retail sales for July, which could provide fresh evidence on the chances of a soft landing for the U.S. economy.

Federal Reserve officials said Thursday they were confident inflation was cooling enough to allow interest rate cuts to proceed and would rely on economic data to determine the size and timing of any cuts.

“Investors are expecting a sharp rate cut at the next Federal Reserve meeting in mid-September,” said David Morrison, senior market analyst at brokerage Trade Nation. “The question is whether stocks can manage to rally in the interim or whether disappointing inflation and employment data will change course.”