STOCK markets have “thrown a tantrum” over good news in the US, after being unfazed by nuclear threats and political extremism, a financial expert has said.

London’s FTSE 100 dropped 2.64 per cent yesterday to its lowest level since last April – the biggest percentage drop since the day after the EU referendum.

It followed a 4.6 per cent drop in the US’s Dow Jones on Monday, wiping out this year’s gains.

Kevin Forbes, who chairs the Personal Finance Society in Dorset and Hampshire, said “euphoria” had caused some to forget that markets can “plummet as well as soar”.

Mr Forbes, a partner in Branksome-based Strategic Solutions, said: “As much as I have tried to persuade many potential new clients not to jump on the bandwagon simply for fear of missing out, I am now sure I will need to be counselling others not to jump off the exact same vehicle due to short-term fear.”

The US slump came after stronger wage growth at a time of low unemployment, fuelling fears of a rise in interest rates.

Mr Forbes added: “The markets weren’t interested in dropping when the two egotists either side of the Pacific postured and mentioned the words ‘war’ and ‘nuclear’ in the same speeches, nor were they budged from their upward trajectory by rumours of extreme right- or left-wing parties potentially controlling some of the world’s largest economies in the recent and current rounds of the European elections.

“However as soon as good news arrives, they decide that it’s time to go off the rails and throw a tantrum.”

Gary Neild, partner in Blue Sky Financial Planning in Poole, said: “This market drop should be no surprise and it is something we have been warning of for some time. It’s important to look at the recent correction in context of what happened last year. In 2017 we experienced the lowest levels of volatility in a generation. What is happening currently is not unusual.

“US equity markets in our opinion were overly optimistic and were susceptible to any bad news. The problem is that the US has been doing ‘too well’. The stock market has been riding high on the back of low unemployment and strong corporate data and confidence. A bi-product however is the threat of wage inflation and rising borrowing costs which increases the likelihood of multiple interest rate rises. This is what has spooked investors.”

He said the weakening in prices would present investment opportunities.

Mr Neild added: “In my opinion this is just a welcome correction because the recent momentum was unsustainable. Investing is rarely plain sailing.

“The UK also has low unemployment and some wage inflation but I don’t think anyone feels as though our economy is overheating.”