Global stock markets tumbled, Dow fell below 10,000 since 2004
October 6, 2008
Wall Street and stock markets worldwide tumbled Monday as financial crisis worries spread around the globe, driving the Dow Jones Industrial Average to its biggest loss ever during a trading day before recovering to with a loss of 370 points or 3.58 percent. The Dow finished at 9,955.50, its first close below 10,000 since 2004. The Dow threshold of 10,000 was first set in 1999.
Earlier Monday, before Wall Street ever woke up, major markets in Asia, Australia, and Europe have sunk. The Japan’s Nikkei average lost 4.25 percent, while South Korea's Kospi index finished the day off 4.3 percent, Hong Kong's Hang Seng lost nearly 5 percent of its value, and Australian Securities Exchange plunged about 3.4 percent.
Then the losses spread across Europe; the London’s FTSE-100 tumbled 7.9 percent, the German’s XETRA DAX plunged 7.1 percent, and France's CAC-40 fell 9 percent. Russia's RTS index fared worse, shutting down after it fell more than 20 percent.
Broader U.S. stock indexes also tumbled. The Standard & Poor's 500 index shed 42.34, or 3.85 percent, to 1,056.89; and the Nasdaq composite index fell 84.43, or 4.34 percent, to 1,862.96. The Russell 2000 index of smaller companies dropped 23.49, or 3.79 percent, to 595.91.
The global financial meltdown also hit Latin America, where the economies are reliant on commodity exports. Brazilian stocks plunged 15 percent to a two-year low before rebounding, and trading was halted twice on Sao Paulo's Ibovespa index. By the end of the day the Ibovespa was down 5.4% to its lowest close since Nov. 28, 2006. Mexico's IPC index dropped 5.4 percent, while Argentina's Merval ended the day down 5.9 percent, Chile's IPSA was down 6 percent, and Colombia's IGBC fell 4.9 percent.
Starting from overheated housing market in the U.S., the financial crisis has spread around the world. Banks fearful of lending to other banks let alone to businesses and consumers. That has led to worries that economies around the world might not only sputter but slide into reverse.
Proping Up Ailing Financial Market
The sell-off came despite efforts of U.S government and governments across Europe to prop up the ailing financial market. Investors remain worried that banks are too fearful to lend and are cutting liquidity to the economy.
Over the weekend, governments across Europe rushed to prop up failing banks, while the governments of Germany, Ireland, France, Greece, and Sweden also said they would guarantee bank deposits. Iceland and Denmark issued guarantees Monday.
The Fed also took fresh steps Monday, saying it will begin paying interest on commercial banks’ reserve and will expand its loan program to squeezed banks.
Last Friday U.S. government signed into law a $700 billion bailout package, under which the federal government will buy bad mortgage-related assets off the books of banks.
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