Global Financial Meltdown: Global Stocks Officially Enter Bear Market After Crashing 22%

The MSCI Global Stock Index Has Officially Entered Bear Market Territory For The First Time Since The Start Of The October 2007 Recession After Crashing 22% and Losing 10 Trillion In Value.


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The MSCI Global Stock Index has officially entered bear market territory dropping following yesterday’s global financial market meltdown, which marked the culmination of a 22% crash and a whopping $10 trillion in value.

Global Stocks Officially Enter Bear Market After 22 Percent Crash

Global Stocks Officially Enter Bear Market After 22 Percent Crash

The last bear market for the MCSI marked the beginning of the Great Recession of 2007/2008 which lasted for 16 months and so global stocks losing 60% of their value before recovering.

By comparison, global stocks have loss of only $10 trillion so far pales in comparison to the $60 trillion lost in the 2007/2008 bear market which is provides a clear indicator of the huge risk of a massive downside crash that remains on the horizon just over the horizon.

Comparing The Current Global Stock Bear Market To The Great 2007 Recession

Comparing The Current Global Stock Bear Market To The Great 2007 Recession

CNBC has finally wrote a story on this topic and it is there top news headline. They are warning with the DOW 3% from officially entering bear market Territory,  the US is most likely next.

Global Stocks in Bear Market, And US Is Probably Next

Global stocks officially entered a bear market this week as the benchmark MSCI World Index fell more than 20 percent from its most recent high in May. Investors say the U.S. is next.

Darrell Gulin | Stone | Getty Images

The selloff—which pushed markets from China to Portugal into bear territory—came as fears of a Greek default escalated and economic data around the globe hinted at a worldwide recession.

“You can make an easy argument that the Dow Jones Industrial Average [.DJIA  10757.67    23.84  (+0.22%)   ] will play catch up by 10 percent to other developed nations,” said Dan Nathan, an options and equities trader who runs Riskreversal.com. “Sixteen of the Dow 30 get more than 25 percent of their revenues from Europe. Something has to give because if 2008 taught us anything, it is that developed economies do not de-couple.”

The Dow hit its bull market high on April 29, closing at 12,810.54. The benchmark Friday is about 17 percent off from that high after its worst week in almost two years.

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The news was also coupled with Standard and Poor’s officially downgrading the credit rating of 7 Greek banks to junk status.

Across the pond, European leaders continue to sound the alarm of a complete global financial collapse if Euro leaders don’t get their act together immediately.

The leaders of the G-20 nations have jointly announced they will act to take any necessary measures to fend off a global recession. The pledge has temporary stopped the market sell-off in Europe following the markets opening.

However, the calm may be short lived as investors realize it will be much harder to get the governments of each of the G-20 nations to actually act in solidarity on their promise. After all, each nation will need to convince their citizens of the necessity to fork over taxpayer dollars to bailout the bankers for the at least the second time in 3 years

In fact, the commodities markets haven’t been calmed by the pledge. Their sell-off continues which is a clear sign the markets are pricing in a global recession.

EU Banks Infected

Fears about another global financial meltdown, continue to grow. Stocks plummeted today, with the Dow Industrial Average at one point falling as much as 527 points. In Europe, Standard & Poor’s downgraded the ratings of seven Italian banks and headlines were running wild, about French banks looking for cash in the Mideast, although BNP’s CEO denied those claims. This week finance ministers from the BRICS nations are meeting here in Washington at the IMF. But how much good could they really do? Economic Analyst, Gonzalo Lira weighs in.

Here are the latest headlines from the Guardian:

David Cameron:

David Cameron: global economy is close to ‘staring down the barrel’

Cameron speech says failure of eurozone leaders to stabilise single currency is taking world economy to brink

David Cameron

David Cameron has told eurozone leaders to ‘stop kicking the can down the road’. Photograph: Jason Szenes/EPA

The global economy is close to “staring down the barrel” and is threatened by the failure of eurozone leaders to agree a lasting settlement to stabilise the single currency, David Cameron warned on Thursday night.

As markets tumbled around the world, amid gloomy assessments from the IMF and the World Bank, the prime minister issued his gravest warning about the global economic outlook and bluntly told eurozone leaders to stop “kicking the can down the road”. “We are not quite staring down the barrel but the pattern is clear,” the prime minister told the Canadian parliament in Ottawa.

“The recovery out of the recession for the advanced economies will be difficult. Growth in Europe has stalled, growth in America has stalled. The effect of the Japanese earthquake, high oil and fuel prices is creating a drag on growth. But fundamentally we are still facing the aftermath of the world financial bust and economic collapse in 2008.”

Cameron’s speech came as Christine Lagarde, the managing director of the International Monetary Fund, warned world leaders that “time is of the essence” as investors took fright at politicians’ failure to tackle sickly global growth and the spiralling eurozone debt crisis.

As Cameron spoke, the FTSE 100 index tumbled 246 points, or 4.67%, to close at 5041 – the blue-chip index’s worst daily fall in percentage terms since March 2009. On Wall Street, the Dow Jones index closed 3.5% down at 10773 points, while share prices in France and Germany also dropped sharply.

The prime minister identified one of the main problems as the failure of eurozone leaders to agree a “lasting solution” to stabilise the single currency.

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IMF Chief:

IMF chief tells Europe: you must bail out the banks again

IMF says debt crisis has cost institutions €300bn as bank shares plummet on new market fears for global economy

London Markets Plunge On Global Economy Fears

A City of London worker sits in front of the Bank of England. Share prices tumbled following several warnings over future prospects for the global economy. Photograph: Oli Scarff/Getty Images

Christine Lagarde, the managing director of the International Monetary Fund, urged Europe’s leaders to bail out their fragile banks, as the boss of the eurozone’s biggest bank, BNP Paribas, rejected fears that the financial sector was “in peril”.

Addressing journalists in Washington at the opening of the IMF‘s annual meeting, Lagarde said that Europe must tackle “this twin problem of sovereign debt and the need to strengthen capital buffers”.

She said: “It is critical that to fuel growth, banks be in a position to finance the economy, to finance enterprises, to finance households, to finance local governments. To do that they need to have the balance sheet that will actually support credit to the economy.”

Despite the recent stress tests carried out by the European Banking Authority, which suggested that most of the banks were well-placed to cope with the sovereign debt crisis, the IMF estimates that banks have taken a €300bn (£260bn) hit in the past year as a result of the growing risk of default by Greece and other vulnerable eurozone countries.

Lagarde’s call came as Baudouin Prot, BNP’s chief executive, emphatically denied reports that it was in talks with Middle Eastern investors about securing a capital injection. “I formally deny this,” he said. “We have no particular contact because we don’t need a capital increase.”

But French bank shares – which have lost 50% of their value in three months – continued to fall as markets endured one of their worst trading days since 2009. BNP was off more than 5% and close rival Société Générale fell almost 10%.

In the UK, bailed-out Lloyds Banking Group was down more than 10%, bearing the brunt of anxiety about a slowdown in economic growth. The FTSE 100 closed down 4.7% with large falls from mining companies, which make up a large part of the index and whose fortunes are closely tied to global economic prospects. Out of the 100 stocks, only technology company Autonomy – supported by a bid from Hewlett-Packard – fell by less than 1%.

A survey from the crucial manufacturing sector, which chancellor George Osborne had hoped would lead an economic recovery, exacerbated the nervous mood by suggesting industry had been hit hard by the collapse of confidence around the world.

The CBI’s monthly industrial trades survey showed declining orders, both at home and abroad, and a rising backlog of finished goods, in the latest evidence that the recovery has stalled.

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BNP insisted on Thursday that it could maintain a core tier one ratio – an important measure of financial strength – of 9% by January 2013 even if it sustained losses through the eurozone crisis.

But Mohamed El-Erian, boss of the world’s biggest bond investor Pimco, warned in a blog on the FT’s website that there were “signs of an institutional run on French banks”.

Europe could be thrown into a “full-blown banking crisis”, he added, unless the European Central Bank and governments worked together to create a European-style Tarp – the troubled asset relief programme put in place by the US in the weeks after Lehman Brothers collapsed in September 2008.

Even gold appeared to be losing its lustre on Thursday. Its price crashed as spooked investors decided to cash in after a record boom in the price of the precious metal.

Analysts said investors were selling gold to buy dollars, betting on a strengthening US currency. They noted, worryingly, that a similar trend occurred after the collapse of Lehman which ushered in the worst recession in living memory. Gold is a traditional safe haven during dark financial times. “Gold has been a pseudo currency for traders,” said Stuart Rosenthal of Factor Advisors. “It’s been a vote of no confidence on the US dollar.”

Now traders have changed their minds and are selling up: gold dropped $80 to $1,742 an ounce in early trading, a fall of 4%. The price of silver, which has enjoyed a similar boom, also collapsed.

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Last, but not least, the warning this is 2008 all over again – but this time it is much worse.

Global economy: it could be autumn 2008 all over again – but worse

A dearth of financial weapons and political disunity over how to fire them could spell a lost decade for the whole world

Christine Lagarde

IMF managing director Christine Lagarde fears a a repeat of autumn 2008 financial crisis Photograph: Manuel Balce Ceneta/AP

It is all scarily familiar. Finance ministers and central bank governors gather in Washington for the annual meeting of the International Monetary Fund against a backdrop of weakening growth and tumbling financial markets. Three years on from the collapse of Lehman Brothers, the air is thick with memories of a time when the world was 48 hours away from cash machines running out of money.

Both the IMF and the World Bank are issuing warnings by the bucketload about the need to address the crisis they see looming – and with good reason. This could be the autumn of 2008 all over again, only worse this time.

Christine Lagarde, the IMF’s managing director, identified two reasons why that could be so. First, policymakers have used up virtually all their ammunition. Interest rates are already at historically low levels and countries that once had the cushion of sound public finances are now running big budget deficits.

Second, there was unanimity about what needed to be done in 2008 and the political will to stimulate demand and recapitalise shaky banks. Lagarde looked back nostalgically yesterday to the London G20 summit in April 2009 as a moment when all leaders came together, noting: “I hope that will happen again.”

Fat chance. The fact that only six members of the G20 could be persuaded to sign up to David Cameron’s round-robin letter urging Europe to sort out its sovereign debt crisis says much about just how divided leaders are about what needs to be done. Churchill’s words from a different era were made for today’s politicians who are “resolved to be irresolute, adamant for drift, solid for fluidity and all-powerful for impotence”.

The list of problems is long and growing. In Europe the issues spooking the markets are the threat of a Greek default and the solvency of banks, particularly those in France. Investors are losing patience with windy declarations about the determination to safeguard the integrity of the single currency. They see austerity fatigue in Greece and bail-out fatigue in Germany. On the other side of the Atlantic the obstacle to recovery is the the bombed-out state of the housing market. The real estate bubble left deep scars: debt, negative equity, high unemployment. Wall Street’s precipitous fall this week reflects investor concern that growth is slowing and policymakers are increasingly impotent.

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The rest of the world has its problems as well. China has been dampening down its economy because of over-heating, and the emerging world in general is vulnerable to a slowdown in the west. Lagarde noted that the repair job to the global economy after the Great Recession was supposed to involve two rebalancing acts – a shift of demand from the public to the private sector, and stronger domestic demand from surplus countries such as Germany and China to allow deficit nations like the US to export more. Neither is happening.

So what happens now? As Gerard Lyons, chief economist at Standard Chartered bank, noted, in the west economic fundamentals are poor and confidence is shot to pieces. It is probably too late to avoid a double-dip recession even if policymakers were to agree this weekend to shore up European banks, to take the steps needed to prevent the euro imploding and, by some miracle, conjure up a credible plan for jobs and growth. The real concern is that three years after Lehmans the global economy’s problems have proved so intractable. It is not just the tough winter ahead that politicians need to worry about. It is the risk of a lost decade as the whole world goes Japanese.

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Categories: WORLD NEWS

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