The FTSE 100 fell 2.8% yesterday, closing below 6,000, as global equities sold off. There were many factors negatively affecting equity markets. Investors remained nervous of a Chinese slowdown and the impact that this could have on global growth. The decision by the US Federal Reserve last week not to raise interest rates has also muddied the waters. Their decision not to raise rates due to international concerns possibly suggests that global events may hinder progress in the improvement in the US economy. Meanwhile the Brazilian Real fell to record lows against the US dollar, unsettling emerging markets.

At the stock level the recent admissions by Volkswagen regarding their vehicle emissions in the US also caused unease amongst other car manufacturers and industrial stocks. Volkswagen took the immediate step of making a €6.5bn provision for any potential liabilities, which will hit their accounts in the third quarter of this year; however expectations are that this could only be the first of many they may have to make. News that Zurich were pulling out the takeover of RSA also caused unsettle.

Government bonds were beneficiaries of the increased volatility in markets, with yields across most maturities falling in the UK, US and Europe. With regard to the latter German five yields fell below zero whilst Holland was able to auction three year maturity paper at an average yield of minus 0.156%.

Equity markets have bounced this morning, with the FTSE 100 back above 6,000 at 6,014 at the time of writing. Markets have been helped by resilient economic data out of Europe.