What is happening in the financial markets and what does it mean for me?

Stock markets around the world have suffered sharp drops since Wednesday, with fears growing in the aftermath of Donald Trump placing new tariffs on all goods imported to the US.

Here, the PA news agency looks at what the recent turmoil means for households whose finances may have been affected.

What is happening in the stock markets?

In the UK, the FTSE 100 hit a new one-year low after the index saw its worst single-day of trading since March 2020 on Friday.

On Monday morning, every one of the 100 stocks tracked on the index was declining.

European, US and Asian indexes have also taken a battering in the past few days as Mr Trump’s trade rules, as well as retaliatory tariffs imposed by China, reverberated across the financial markets.

The fresh sell-off on Monday was sparked by Mr Trump standing by his trade rules when questioned about the stock market turbulence.

“Sometimes you have to take medicine to fix something,” he said about his tariffs, which are intended to boost US production and businesses in the long term.

– Is this worse than other periods?

Some analysts have warned that the recent shock is among the worst to face the financial markets in decades.

Henry Allen, a macro strategist for Deutsche Bank, said it is “no exaggeration” to describe the recent movements as “historic”, with huge swings happening across different asset classes, not just stocks and shares.

The S&P 500, which tracks America’s top listed companies, saw its fifth-worst two-day performance last week since the Second World War.

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On Monday, Hong Kong’s Hang Seng index was on track for its worst single-day performance since 2008.

Nevertheless, while the FTSE 100 has suffered sharp drops in recent days, the index is falling from record highs reached earlier this year.

Stocks that make up the index are therefore still much more valuable now than they were in recent years thanks to trading strengthening over time.

– How are investments and pension savings being affected?

US tariff plans have shaken financial markets and some households are seeing the impact of volatility on their investments and pension pots.

Even if people have never bought stocks and shares, many have a pension that invests in them which means they could be affected by global stocks losing value.

While this will “inevitably be troubling” for investors, it is “important not to panic and look at long-term investment horizons”, Susannah Streeter, head of money and markets at Hargreaves Lansdown, said.

“History has shown that markets do recover from times of crisis and high uncertainty,” she said.

“It is always worth keeping an eye on an investment portfolio and ensure that you are well diversified across a mix of geographies and asset classes to spread the risk.

“Drip feeding an investment portfolio can also help ride out the volatility.”

Experts are generally warning against people making “knee-jerk” decisions such as changing their investment strategy or cutting back on contributions, which can impact retirement income.

– Could there be an impact on mortgages?

Lenders and estate agents have said tariffs may actually be bringing down mortgage rates on the market.

Tom Bill, head of UK residential research at Knight Frank, said that “the positive news is that US trade tariffs announced last week have put downwards pressure on borrowing costs as markets price in an economic slowdown”.

Martin Temple, an economist for Leeds Building Society, said: “With sharp falls seen across Asian, European and US stock markets, underlying interest rates used to price both mortgage and saving products in the UK have fallen steeply.

“For mortgage customers, this fall is potentially welcome news, as we would expect these lower swap rates to start to feed through into lower mortgage pricing over the next couple of weeks – especially if these falls are sustained.”

However, this also means that savings rates on fixed products could also reduce, he said.

– What’s happening to other assets such as gold and cryptocurrency?

Stocks and shares are not the only asset class to have taken a hit as fears over global trade grow.

“Bitcoin, which did appear to be more insulated from the stock market rout, has now been hit by the turmoil,” Ms Streeter said.

The price of the cryptocurrency dropped to lows of about 75,000 US dollars, falling from record highs of more than 100,000 dollars late last year.

On the other hand, gold has been hitting new highs as investors rushed into so-called “safe haven” assets.

However, even the previous metal was under pressure on Monday, with experts suggesting some investors were cashing in on the asset to cover losses elsewhere.