World markets plunge as debt fears grow

By Wen Sheng (People's Daily Online)

08:26, August 09, 2011

U.S. stocks plunged Monday as investors fear the comeback of a recession, as the downgrade of U.S. sovereign credit by the Standard & Poor's sent global markets on a freefall run. 

The Dow Jones industrials fell 634.76 points, or 5.5 percent, on the first trading day since Standard & Poor's downgraded American government debt on Friday. It was the sixth-worst point decline for the Dow in the last 112 years and the worst drop since December 2008.

On Monday, China's stock markets encountered a "Black Monday" bout, too, as the Shanghai composite stock index fell by 100 points, as investors were unnerved by the first-ever downgrade of U.S. credit.

The Shanghai composite index, tracking the bigger of China's two markets, dropped 99.61 points, or 3.79 percent on Monday on a turnover of 117.5 billion yuan. The smaller Shenzhen market lost 3.33 percent.

Despite Obama administration's strong disapproval, the independent rating agency, the Standard & Poor's, decided to cut the American sovereign credit rating from the top-notch triple AAA to AA+, which immediately threw the global markets to a tumult.

On Monday, officials at Standard & Poor's downgraded the credit ratings of U.S. mortgage giants Fannie Mae and Freddie Mac, and other agencies linked to long-term U.S. debt. The agency says it has also lowered the ratings for: farm lenders; long-term U.S. government-backed debt issued by 32 banks and credit unions; and three major clearinghouses, which are used to execute trades of stocks, bonds and options.

All the downgrades were from AAA to AA+. S&P says the agencies and banks all have debt that is exposed to economic volatility and a further downgrade of long-term U.S. debt. Officials at Standard & Poor's say they will also indicate shortly how local and state governments will be affected by their decision on Friday to lower the long-term U.S. debt from AAA to AA+.

But the S&P downgrade wasn't the only catalyst yesterday. Investors worried about the slowing U.S. economy, escalating debt problems threatening Europe and the prospect that fear in the markets would reinforce itself.

Crude oil, natural gas and other commodities fell sharply on worries that a weaker global economy will mean less demand. Oil fell 6.4 percent to US$81.3 per barrel in New York, its lowest price of the year.

The Dow was down 5.5 percent a 10,809.85. The sharp drop extended Wall Street's almost uninterrupted decline since late July, when the Dow was flirting with 13,000. It fell below 11,000 for the first time since November. The S&P 500 fell 79.92, or 6.7 percent, to 1,119.46. The Nasdaq composite index fell 174.72, or 6.9 percent, to 2,357.69.

Financial markets also did not appear comforted by an afternoon statement by U.S. President Barack Obama, who said Washington needs more "common sense and compromise" to tame its debt.

"Markets will rise and fall,"Obama said. "But this is the United States of America. No matter what some agency may say, we've always been and always will be a triple-A country."
Perceptions that Washington is incapable of addressing the problems of rising debt and slowing growth have contributed to the panic selling. Monday's global stock market sell-off wiped out more than $1.35 trillion in investor wealth worldwide, according to the 5.2 percent drop in the MSCI World Index .

Increases the bookmark

• twitter
• facebook
• Sina Microblog
• digg
• Google
• Delicious
• buzz
• friendfeed
• Linkedin
• diigo
• reddit
• stumbleupon
• Qzone
• QQ Microblog

Related Reading

1. Stocks encounter 'Black Monday', down 100 points
2. Debt, growth fears weigh down stock market globally
3. China's stocks down to 7-week low following U.S. market slump
4. China's stocks drop nearly 1% Tuesday

Leave your comment0 comments

Weekly review

1. The week in pictures(July 31-Aug.6,2011)
2. Chinese-American ambassador to China key to boosting ties
3. Why is Japan sounding 'China threat' alarm again?
4. Political negotiations needed to end Libya deadlock
5. China should adhere to scientific outlook on development
6. Chinese-American ambassador to China key to boosting ties
7. People's Daily website revamps English version
8. Report: China's urban middle-income class growing Most Popular
   • Some countries will pay for misjudging …
   • China's navy carrier to begin maiden vo…
   • The financial crisis comes back to bite…
   • Japan's aircraft carrier jitters unfoun…
   • People's Daily website revamps English …
   • China's submarine completes historic te…
   • China ‘very displeased’ with Japan’s Wh…
   • China, Russia discuss military cooperat…
   • China must punish US for Taiwan arm sal…
   • Chinese Harry Potter fans mourn the end…
   

   Opinions

   1. U.S. selling weapons to Taiwan should be punished
   2. It's time for US to take responsibility
      
   3. Zhouqu's horrible disaster must be remembered
      
   4. The financial crisis comes back to bite us
   5. Why S&P downgrades U.S. credit rating
   6. Rumors of bankruptcy wave groundless
   7. Japan's aircraft carrier jitters unfounded
   8. Political negotiations needed to end Libya deadlock
   9. Use Weibo as a guide, not a master
   10. US: A crisis of debt and of democracy
   

   

   

   What's happening in China

   Shandong braces for typhoon

   1. Scores of flights cancelled as Muifa brushes Qingdao
   2. China willing to facilitate military cooperation with Russia: senior military officer
   3. China's railways carry 1.095 bln passengers in first seven months
   

   China Features

   1. When will the horses run?
   2. Marriage knots unraveling
   3. The spread of Tibetan culture
   4. Blood stains the Silk Road
   5. Whither this speed?
   

   PD Online Data

   1. The Uygur ethnic minority
   2. The Kazak ethnic minority
   3. The Hui ethnic minority
   4. Mongolian ethnic minority
   5. The Tibetan ethnic minority