FTSE reverses losses after ‘flash crash’ plunges European markets

·4 min read
The FTSE 100 made up lost ground on Tuesday after Citigroup said an error made by one of its trader led to a 'flash crash' in European stocks. Photo: Getty
The FTSE 100 made up lost ground on Tuesday after Citigroup said an error made by one of its trader led to a 'flash crash' in European stocks. Photo: Getty

European stock markets closed in the green on Tuesday after Citigroup (C) acknowledged that an error by one of its traders on Monday led to a sudden tumble in some European stocks.

The so-called stock market "flash crash" refers to a rapid fall in the price of one or more assets and is often caused by a trading mistake such as a human error or someone incorrectly inputting the details of a trade.

This led to trading in several European indexes briefly being suspended as stocks plunged just before 8am in London on Monday. Nordic shares were hit the hardest, while other European markets also plummeted.

"This morning one of our traders made an error when inputting a transaction. Within minutes, we identified the error and corrected it," the New York-based bank said. Citi said its London trading desk was behind the error.

Flash cras, French Cac. Chart: Yahoo Finance UK
France's CAC 40 fell sharply on Monday morning as a flash crash caused by a trading error sent stocks plunging. Chart: Yahoo Finance UK

The FTSE 100 (^FTSE) made up some lost ground, up 0.2% following a 0.8% fall. France’s CAC (^FCHI) was 0.6% higher and the DAX (^GDAXI) rose 0.5% in Frankfurt.

London's bluechip index was dragged by Segro (SGRO.L), Britain’s biggest warehouse landlord, after Amazon (AMZN) said its rapid expansion had left it with excess warehousing capacity. Shares in Segro, which counts Amazon as a top-20 customer, dropped as much as 10.6%, the most since March 2020. Amazon shares were up 0.5%.

Despite this, shares in BP (BP.L) soared 5.8% as it cashed in on surging energy prices. The company posted a first-quarter profit of $6.2bn (£4.9bn), the highest in a decade, fuelling calls for the energy giant to face a windfall tax.

The oil stalwart also unveiled plans to make share buybacks of $2.5bn this quarter after surging oil prices helped it offset a $25.5bn charge incurred after exiting its stake in Russian producer Rosneft (ROSN.ME).

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: "The market had already factored in a huge hit due to its Russia exit and now the company has unveiled the price to pay is a big and bold $25.5bn. That’s the amount it has set aside in pre-tax charges and the cost of extricating itself from Rosneft.

Read more: BP profits soar to highest in in 10 years as calls grow for windfall tax

"But surprising on the upside is the boost to underlying profits which came in at $6.2bn, sharply higher than the consensus expected of around $4.5bn. The company has been raking in cash as the supply squeeze on oil markets has intensified."

The invasion of Ukraine and high geopolitical tensions have seen oil prices jump to record highs, currently up 40% since the start of the year, and spiking as high as $139 in the first weeks of the war.

Brent crude (BZ=F) declined 1.4% to $106.13 a barrel. US light crude (CL=F) was 1.4% lower to $103.71 at the time of writing.

It comes ahead of the Bank of England's interest rate meeting on Thursday when the central bank is expected to lift rates and clarify plans for selling some of its £847bn ($1.1tn) government bond holdings.

"With central banks under pressure to tackle rising inflationary forces investors don’t have the luxury of falling back on a benign interest rate environment, with the Federal Reserve set to raise rates tomorrow by 50bps and the Bank of England set to follow suit with at least another 25bps on Thursday," said Michael Hewson, chief market analyst at CMC Markets.

Across the pond, US benchmarks were in the green as investors gear up for the Federal Reserve's May policy decision. The Fed's two-day policy meeting kicked off on Tuesday ahead of an expected 50 basis-point rate hike on Wednesday.

Wall Street’s S&P 500 (^GSPC) advanced 53.01 points, or 0.8%, to 4190.39. The tech-heavy Nasdaq (^IXIC) rose 0.4%, while the Dow Jones (^DJI) added 0.6% at London's close.

Read more: UK private firms face supply chain crunch despite steady growth

Asian stocks were mixed overnight as markets brace for a sharp rate hike in the US. The Nikkei (^N225) slipping 0.1% in Japan, while the Hang Seng (^HSI) drifted 0.1% lower in Hong Kong and the Shanghai Composite (000001.SS) gained 2.4%.

It comes as Australia raised interest rates for the first time in 11 years. The Reserve Bank of Australia hiked its cash rate from 0.1% to 0.35% to curb inflation. The 25bps mid-election increase was more aggressive than some analysts had expected. Shares in Sydney (ASX.AX) closed 0.4% higher.

Watch: How does inflation affect interest rates?

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