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World Stock Markets

August 9, 2011 by staff 

World Stock MarketsWorld Stock Markets, Global markets fell on Monday in the worst trading day since the financial crisis, the elimination of hundreds of billions of dollars of wealth in a setback for the U.S. economic recovery struggle.

Despite the efforts of world leaders to calm the markets, investors were alarmed by the growing economic problems in the U.S. and the debt crisis spread in Europe. The Dow Jones industrial average fell 634.76 points, or 5.55 percent, to 10,809.85.

Asian markets were sharply reduced capital early today as investors fearing a possible slowdown in the global economy continued to flee the shares.

Japan’s Nikkei 225 fell 4.8 percent rate in the morning session, while Hong Kong’s Hang Seng index fell 3.8 percent. Benchmark S & P/ASX-200 of Australia lost 4.9 percent, Taiwan’s TAIEX fell 4.9 percent and the benchmark NZX 50 New Zealand Index shed 3.7 percent.

On Monday, the first trading day since the United States weakened on Friday by Standard & Poor, which said the U.S. Treasury bonds have become a bet at higher risk due to the inability of government to deal with debt, investors actually invested money in U.S. bonds.

With the added concern of a global economic slowdown, investors were trying to Treasuries as a safe haven in times of crisis.

In Washington, President Obama on TV in a bid to reassure markets by declaring that the nation will always meet its obligations. “We have always been and always will be a triple of a country,” he said.

On Monday, S & P followed by the reduction of government by reducing the ratings of mortgage giants Fannie Mae and Freddie Mac and other institutions that depend on federal guarantees, saying that their credit is only as good as the government.

U.S. economic policy were increasingly concerned about market volatility. The Federal Reserve is likely to consider new measures to boost economic growth in today’s meeting your regular schedule.

The Treasury Department has stepped up talks with domestic and foreign investors more than what we are seeing in the markets and intensified their work with other countries to bring together an international response to the crisis. Officials have also been encouraging the European politicians to do more to stem the crisis of increasing debt on the continent, according to people familiar with the matter.

U.S. Politicians are also paying close attention to the new signs of trouble among the major banks. The Council of Financial Stability Oversight, which was established under the financial reform legislation passed last year, held an emergency conference call on Monday to discuss the risks to the financial system posed by the volatility of the market, but take no action.

Bank shares were among the biggest losers on Monday. Bank of America and Citigroup lost more than 15 percent of its value.

Spokesmen for the banks said they were well fortified against the fall of their actions.

The violent market reaction was reminiscent of the 2008 financial crisis.

While an economic recovery appeared to be gaining momentum earlier this year, the economies of the U.S. and Europe have shown in recent months that they are losing momentum and that could take much longer than expected to recover from the 2008 crisis. Investors, who had sent the rising stock markets, has been having second thoughts.

The panic in the markets threatens to undermine the recovery even more. Not only has the massive sale of billions of dollars of wealth eliminated, it is also unsettling to consumers and businesses. The economy needs consumers and businesses have the confidence to spend and hire.

“The truth of the matter is that (investors) are waking up and saying:” The U.S. and the world economy is directed to at least recover soaked for a while, ‘”said Edward Truman, senior fellow at the Peterson Institute for International Economics and former assistant Treasury secretary for international affairs.

The fall in the markets was the worst since December 2008. Standard $ Poor’s 500 & index fell 79.92 points, or 6.66 percent, to 1119.46. European and Asian markets fell, all but 2 percent. Emerging markets such as Brazil and Turkey suffered blows even harder. Oil prices collapsed, and investors concluded that a slowing economy means less demand for energy. And gold soared as investors sought a safe place to keep your money.

But the highlight of the day was that of Treasuries, gobbled up by investors, even after the S & P lowered the credit rating of U.S. Friday for the first time in history. The credit ratings company said the U.S. political system was having difficulty reaching agreement on how to control the national debt and creditors could not safely assume that the U.S. government be returned.

The Obama criticized the decision, saying it was based on faulty logic and faulty math.

Strong demand for Treasury bonds Monday, led lower borrowing costs for the government. He had to pay only 2.34 percent for loans of 10 years, almost a record low on Friday and below 2.55 percent. The resistance of the Treasury made it clear that investors remain confident that the U.S. is the best place to put money in volatile markets.

“Either that or the mattress,” said Karen Shaw Petrou, managing partner of Federal Financial Analytics.

S & P downgraded Fannie and Freddie because the U.S. government agreed to cover their losses when it seized control of the companies three years ago. The companies own or guarantee half the U.S. home loans.

S & P also downgraded the debt of 10 banks federal home loan and the Farm Credit System. The rating agency lowered the bank debt and credit unions is guaranteed by the Federal Deposit Insurance and Credit Union Station National, and several insurance companies.

The immediate impact of these cuts was not clear. In the case of Fannie and Freddie, for example, companies could be forced to pay more to borrow money from capital markets. If that is the case, the interest rate on home loans would probably increase as well.

S & P officials said they expected to announce cuts in states and municipalities that rely on federal government in the coming days as well.

Officials from the Fed and the Treasury together with their European counterparts to inform them about the concerns of investors and to encourage them to take stringent measures to contain the financial turmoil since the debt crisis facing Italy and Spain. The crisis threatens to undermine the economies of fourth and fifth largest in Europe. U.S. Officials have recommended its own response to the 2008 financial crisis as a model.

Some European countries are stronger, such as Germany, have been reluctant to take risks to help their neighbors struggling. But Sunday night, the European Central Bank acted, announcing it will invest in European bond markets in an attempt to shore up Italy and Spain, by reducing the fees paid to borrow money. The shares eased investors in the country debt Monday.

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