Guardian UK: Economic slowdown: World markets fall sharply amid fears about the credit crunch

[marmar]

Economic slowdown: World markets fall sharply amid fears that credit crunch has further to run

Larry Elliott, economics editor
The Guardian, Wednesday August 20 2008



Share prices dropped sharply on the world's financial markets yesterday amid fears that the year-long credit crunch is entering a dangerous new phase marked by a severe economic slowdown and failing banks.

The FTSE 100 index fell by almost 2.5% as financial market traders braced themselves for a fresh bout of turbulence triggered by concern that weakening growth in Europe, North America and Asia would add to the problems of western banks.

Analysts pointed to widening spreads in money markets as a sign that the mood was becoming gloomier after a period in which trading conditions had showed tentative signs of returning to normal. A fall of 129.8 points in the FTSE 100 to 5320.4 was mirrored by a drop of almost 3% in Japan, and declines of well over 2% on the Frankfurt and Paris bourses.

Ken Rogoff, the former chief economist at the International Monetary Fund, added to market jitters by warning that the worst of the crisis was yet to come.

"The US is not out of the woods. I think the financial crisis is at the halfway point, perhaps. I would even go further to say 'the worst is to come'," he told a financial conference in Singapore.

"We're not just going to see mid-sized banks go under in the next few months, we're going to see a whopper, we're going to see a big one - one of the big investment banks or big banks," Rogoff said.

His comments came amid speculation that the US government would in effect be forced to nationalise Fannie Mae and Freddie Mac - the two biggest US housing finance groups and as new figures for housing starts and producer prices suggested that the world's biggest economy was in the grip of stagflation. .....(more)

The complete piece is at: http://www.guardian.co.uk/business/2008/aug/20/globaleconomy.marketturmoil

[roamer65]

1. October is just around the corner.

We all know what that month often brings to the markets (1929 and 1987).