Brazil, China and U.S. stock markets plunge
NEW YORK, SHANGHAI & SAO PAULO (BDCi) – In early Monday morning trading, major stock indices of the world were wobbly from the late Friday Standard & Poor downgrade of the United States as well as the short term maneuvers of the European Central Bank.
The Brazilian stock index, Bovespa, was down more than 7% at around 49,000, the lowest it’s been since mid-2009.
The Dow Jones industrials index was down another 500 points, trading below 11,000 for the first time since the 4th quarter of 2010, essentially moving the stock market from positive territorial gain in 2011 to negative in just a few hours.
The leading Chinese index, the Shanghai Composite (SSE) closed 3.8% down today to 2,526.82, lower than the 52-week low of 2,564.84.
Gold was the only bright spot today, moving up almost 4% to a price of $1,712.60. Of course Gold is widely sold as a safe haven from the troubles faced by a struggling economy, where the currency’s future prospects are “doom and gloom”.
Late on Friday after the market’s close, S&P cut the United States’ once-thought-invincible long-term credit rating of AAA by one notch to AA-plus on concerns about debt levels in the world’s largest economy. The downgrade could eventually raise borrowing costs for the U.S. government and companies, as well as for consumers.
The European Central Bank (ECB), hoping to jumpstart the struggling Italian and Spanish economies, announced the start of a bond-buying program in those two countries. This program would raise bond prices and reduce bond yields, which would theoretically spur investment in those countries since loans would be easier to access.
Even with the move by the ECB, it didn’t seem to influence the broad sell off of stocks.
“People are trading on fear at the moment,” said Hong Hao, a global strategist at CICC. “This ECB move is just a short term fix, it doesn’t change anything fundamental.”
In an early afternoon address at the White House Monday, United States President Barack Obama played down the downgrade, referring to S&P as “some agency” and recounting the words of famous U.S. investor Warren Buffett who once uttered that he’d give the country a AAAA credit rating, much less a AAA one.
By Don Weinstein Source: Reuters, Yahoo Photo courtesy of Stock Market Today 8 August 2011
1:00p.m. P.D.T.