Stocks plunge around globe; Lanka only exception
Stock markets worldwide plummeted on Monday, as a financial crisis
that began in the market for U.S. home mortgages spread to almost all
corners of the global economy.
Stocks lost value in 42 of the 43 nations with widely followed
markets; the only exception was Sri Lanka.
U.S. markets were closed for the Martin Luther King Jr. holiday, but
all of the world's other major economies experienced a sell-off. Stock
prices fell 7 per cent in France and Germany, 5 percent in China and
Great Britain, and 4 per cent in Japan.
And if U.S. markets' futures contracts are any indication, markets
will be in for a major decline today amid concerns about bond insurers
and the health of financial institutions. "It was all about blood on the
wall" yesterday, said Georges Ugeux, chairman of Galileo Global
He was visiting the Indian stock exchange, which fell 7.4 per cent,
the equivalent of a 900-point drop in the Dow Jones industrial average.
"For them, this is a Black Monday," he said. Behind it all: Investors
worldwide grew fearful that problems from massive losses on loans made
to U.S. home buyers will cascade through the world financial system.
For example, the Bank of China is now forecast to record a
multibillion-dollar loss on U.S. mortgage investments.
Add to that the slowing U.S. economy, and it was too much for
investors worldwide. "We're in a global economy," said Randy Bateman,
chief investment officer of Huntington Asset Advisors. "This is just the
result of a perfect storm of problems that have surfaced here in the
last two weeks that have manifested in the stock markets - all of them."
Although the European stock markets have avoided most of the
volatility of the U.S. stock exchanges in recent weeks, European Union
officials voiced anxiety yesterday that the U.S. economic slowdown might
begin having a stronger impact on Europe.
"We are all concerned," said Finance Minister Andrej Bajuk of
Slovenia, whose country holds the EU's rotating presidency. "We are
following the events on a daily basis. We hope things will not be as bad
as they may look."
Other European officials said they hope the strong European economy,
driven by declining unemployment and a strong euro, will outweigh the
emotional response to the economic slowdown in the United States.
"It seems that the markets are considering the possibility of a more
pronounced slowdown, even a recession in the U.S.," EU Monetary Affairs
Commissioner Joaquin Almunia said yesterday.
"I hope they will pay attention also to the real information about
the economy, in particular in Europe, because, at least in Europe, the
economic fundamentals of our economies are sound."