The historical downgrade of the United States’ creditworthiness and the deepening debt crisis in Europe roiled markets throughout the world on Monday. The Dow Jones Industrial Average dropped 1.9 per cent shortly after trading began in Wall Street, even as the New York Stock Exchange attempted to ease volatility by invoking a little-used rule that prohibits the dissemination of price indications before the opening bell. The Standard & Poor’s 500 stock index tumbled 2.4 per cent, and the Nasdaq Composite 2.8 per cent. The market’s early losses continued last week’s downward race, when the Dow posted its worst weekly point performance since 2008. European stocks were on a rollercoaster, as investors oscillated between anxiety about worsening debt woes in Italy and Spain, and optimism about recent, aggressive action by the European Central Bank to buy bonds from both countries. Asian and Middle Eastern markets also tumbled amidst pessimism about the prospects of the global economic recovery. Somewhat counter intuitively, US bonds remained a safe haven for investors, despite Standard and Poor’s downgrading of the US’s long-term credit rating from AAA to AA plus on Friday.
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FILED UNDER: economy