STOCKS PLUNGE WORLDWIDE-Stock
markets worldwide on Monday suffered one of their
worst routs since 9/11 terrorist attacks on growing fears that U.S.
economic woes could turn global boom times to bust.
Foreign markets, had been sliding in recent weeks along
with U.S. shares, had a selling frenzy that left many of them
down more than 5% for the day, and some down as much as 8%. The German
market dived 7.2% -- the equivalent of the U.S.
dow Jones industrial average plummeting 871 points. Stocks sank 5.5% in Hong Kong, 7.4% in India and 6.6% in Brazil.
Early today in Asia, the selling wave continued, setting a worrisome
tone for a beleaguered Wall Street when U.S. markets reopen after being
closed Monday in observance of Martin Luther
King Day.All of this started since the
start of the year as the outlook for the U.S.
economy has gone from bad
to worse amid the housing crisis and rising losses on mortgages and
other consumer loans at major banks.
Many analysts warned against becoming too pessimistic about the global
economy, noting that the U.S. doesn''t dominate world growth as much as
it did 20 years ago, and that many foreign countries have built up
massive wealth reserves to see them through rough waters. "It remains to be seen whether domestic demand will
continue to accelerate and make up" for weakening demand in the U.S.
and elsewhere for Asian goods. At the end of trading Monday, the blue-chip Nikkei
225-share index was down 27% from its 2007 high, compared with a 15.7%
decline in India''s main index and a 16.2% drop in the German market
from their respective highs.Despite that volatility, U.S. investors have scored
handsome gains in foreign stocks this decade thanks to robust economic
growth abroad and a long decline in the dollar''s value.
For example, the Fidelity Diversified International
STOCK mutual fund
posted a cumulative return of 184% in the five years ended Dec. 31,
compared with 78% for the U.S. Dow index.
Lured by such rich returns overseas, U.S. investors have pumped
hundreds of billions of dollars into foreign stock mutual funds in the
last few years. The stronger dollar is compounding losses for U.S. investors in foreign markets.
That raises the risk that Americans will add to the selling wave
overseas -- by taking profits in foreign stock mutual funds, for
example.For the moment, simple fear of the unknown is driving many investors
and traders to raise cash as a buffer in their portfolios, experts
said.
The markets'' decline also is being exacerbated by short-term traders
who "don''t actually give a toss about the macroeconomics," said Peter
Bickley, director of economics at Tilney Private Wealth Management in
Shrewsbury, England.
"All you care about is which way the wind seems to be blowing, and it''s
not too difficult to spot that at the moment the wind is blowing in a
rather negative direction."
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