Updated: Shares slide across the world
Updated 10.02 p.m.
The Dow Jones Industrial Average plummeted 625 points, or 5.5 percent this evening, dropping below the 11,000 level for the first time since November, as markets continued a global sell-off.
US stocks hit fresh lows for the day as President Barack Obama gave a televised speech in which he defended Washington's credit-worthiness and declared that the United States "always will be a triple-A country".
Standard & Poor's lowered the US long-term sovereign debt rating from AAA to AA+ after markets closed Friday, citing Washington's inability to rein in its mounting deficits.
This morning, Standard & Poor's extended its downgrade to mortgage giants Fannie Mae and Freddie Mac, whose bonds are guaranteed by the US government and widely held around the world.
Stock markets in Asia began the global rout. The main stock index fell almost 4% in South Korea and more than 2% in Japan. European markets opened later and fell, too.
It was the first chance for global investors to respond to Standard and Poor's announcement late on Friday that it was reducing its credit rating for long-term US government debt by one notch, from AAA, the highest rating, to AA+.
The move was not a total surprise but came when investors were already feeling nervous about a weak US economy, European debt problems and Japan's recovery from its March earthquake.
Fresh memories of the financial crisis three years ago are also driving investors away from risky investments and into what is considered safer.
"Fear of a repeat of 2008 is what's really driving investments," said Gary Schlossberg, senior economist with Wells Capital Management.
Gold, which investors traditionally buy when they want a safe investment, rose above 1,700 dollars per ounce for the first time. Its price remains below its 1980 record after adjusting for inflation.
Prices for US government debt rose - even after S&P essentially said they were a riskier investment than the debt of some other major world economies - because Treasury bonds are still seen as one of the world's few safe havens. Prices rise as demand increases.
Where Treasury prices finish the day will be more important than where they are at the start, Bill O'Donnell, head of US Treasury strategy at RBS Securities, said.
"I want to see how the market clears and how it synthesises the cacophony of news of late."
Investors are worried that Spain or Italy could become the next European country to be unable to pay its debt. The European Central Bank said it will buy Italian and Spanish bonds in hopes of helping the countries avert a possible default.
Seeking to avert panic spreading across financial markets, the finance ministers and central bankers of the Group of 20 industrial and developing nations issued a joint statement Monday saying they were committed to taking all necessary measures to support financial stability and growth.
"We will remain in close contact throughout the coming weeks and cooperate as appropriate, ready to take action to ensure financial stability and liquidity in financial markets," they said.
Crude oil, natural gas and other commodities fell on worries that a weaker global economy will mean less demand. Oil fell $2.84 to $84.04 per barrel.
Last week, the Dow Jones industrial average fell almost 700 points. That was its biggest point loss since October 2008, during the financial crisis. The Dow has dropped in nine of the last 11 trading days.
Worries about the US economic recovery have been building since the government said that economic growth was far weaker in the first half of 2011 than economists expected.
Then reports showed that the manufacturing and services industries barely grew in July.
Fears about a weaker US economy have overshadowed profit growth businesses have reported.
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Ms Francesca Abela
Aug 9th 2011, 12:50
L-aqwa il 500 ewro li il Ministri taw lilhom infushom! L-Ewropa fi krizi u anke hadu il pay cuts u aw Malta ghadna ' Money no problem ' ghall min baqa igawdi1 Ara il haddiem iz zghir mkisser bil kontijiet tal ilma u dawl, petrol u issa biex tkompli taxxaq anke dizastru fit trasport pubbliku! L-aqwa il progetti godda li jiswew il belli liri mhux il holqien tax xoghol!
john muscat
Aug 9th 2011, 09:15
Our national debt is running into billions and we are still squandering millions on city gate, unimportant new parliament building (perhaps the new parliament is being built near the bus terminus so that the ministers etc will be using the public transport and so save on fuel for their fuel guzzling cars!!) and the roofless theatre. And we still pay our taxes and take the brunt of over spending by those who should know better.
Alex Falzon
Aug 9th 2011, 07:43
This is not just Europe... it's the whole world that is facing another recession.
Mr Paul Micallef
Aug 9th 2011, 09:15
We are in EUROPE why should we still depend on the AMERICAN economy to make ends meet???
The EURO will die and we as a small nation will feel the full brunt, no money in our coffers, we will have to do like the rest or EUROPE, who will help us then????
I have just received my ELECTRIC bill, Eh Mr Gatt can you lend me 500 eruo so i can pay it????
OIL IS AT 84 a barrel how come we are stll paying these bills??? minn fejn qed tixtrih iz-zejt??? u mela you had a pay rise of 500 euro xi hadd irrid ihallas, tibzax ha tigi l-elezzjoni mhux ghax ta titilfu ta, halli meta jassal is-sajf tixghel l AC u tibda thallas minn butek.Ahleb pep.
Alistair Abela
Aug 10th 2011, 02:21
@Paul Micallef: lol iz zejt dejjem sa jibqa joghola u mix-tort ta' l-ebda ministru jew gvern ax iz zejt mhux infinit. Issa naraw meta jitilaw il-labour kemm ha jnaqqaslek il-kont tad dawl! Mr Micallef id dawl dejjem sa jibqa joghla, u jekk ma tridx thallas il kont tad dawl gholi, investi f'energija alternattiva. SIMPLE.
Mr Charles Cremona
Aug 8th 2011, 21:53
The world seems to be heading into a terrible depression and people in Malta are more worried about the price of a barrel of oil. If the world economy keeps sinking as it is at present we won,t be able to afford to buy oil as we all be out of work soon.
Kenneth Galea
Aug 8th 2011, 20:55
European debt is mounting and mounting and spiralling out of control. Yet they spend millions to billions of pounds in a sensless war against Libya. They continue to accept illegal immigrants from Africa who are only a burden on the social welfare system, they add extra financial burdens to the citizens of the recipient countries who are struggling to make ends meet. Europe does not have the guts to tackle these issues, I am sure the debt will go down considerably if it did.
a borg
Aug 8th 2011, 20:22
it is taught in economics that a recession is a correction of excess optimism: the greater the optimism the deeper the recession. the recession will not really go away until the correction is complete.
D. Xerri
Aug 8th 2011, 19:55
Do you remember when PN used to tell us that its not a Taxxa but a Tariffa :~)
And we still had to pay !
Now They wont tell us its an Austerity Measure Which is the REAL TRUTH so instead we hear the same song over and over like oil is expensive we have to revise it every month - electricity is costing us a lot so we have to raise the bills!
ITS a polite and comfortable way instead of saying its An Austerity Measure which sounds too harsh.
And we still have to pay !
PN are undisputed Masters of illusion !
Mr Tony Camilleri
Aug 8th 2011, 22:12
http://finance.yahoo.com/news/Oil-Falls-to-EightMonth-Low-bloomberg-2963454866.html
Oil Falls to Eight-Month Low in New York as Investors Buy Treasuries, Gold
"....Oil for September delivery fell $3.47, or 4 percent, to $83.41 a barrel at 2:03 p.m. on the New York Mercantile Exchange. Oil dropped to $82.52, the lowest intraday price since Nov. 24. Prices have retreated 8.8 percent this year. Crude declined 9.2 percent last week, the biggest drop since May 6...."
Sandra, jekk fi New York qiegħed $82.5 kif qiegħed daqshekk għoli fl-Ewropa?
U aġna minn fejn nixtruh għax il-Gvern qatt ma jrid jgħid għax inkella jinkixef kemm q
Mr Lawrence Fenech
Aug 8th 2011, 18:16
AUSTIN IZ-ZEJT QIEGHED $84 il-BARMIL TISTA TERGA' IZZID IL-PETROL U ID-DISEL
Ms Sandra Cachia
Aug 8th 2011, 19:29
Fl Europa qieghed $106. Dak ta New York
Mr L Zammit
Aug 8th 2011, 22:05
dejjem jippruvaw jingannaw! Dak il-prezz hu ta' New York. Ikkwota ta' l-Ewropa man ghax ahna fl-Ewropa qeghdin nghixu.
Mr Tony Camilleri
Aug 8th 2011, 22:15
http://finance.yahoo.com/news/Oil-Falls-to-EightMonth-Low-bloomberg-2963454866.html
Oil Falls to Eight-Month Low in New York as Investors Buy Treasuries, Gold
"Oil for September delivery fell $3.47, or 4 percent, to $83.41 a barrel at 2:03 p.m. on the New York Mercantile Exchange. Oil dropped to $82.52, the lowest intraday price since Nov. 24. Prices have retreated 8.8 percent this year. Crude declined 9.2 percent last week, the biggest drop since May 6......
Oil may test $76.17 if it breaches technical support in the $82.87 to $83.85 range, an area defined by last week’s low and the 61.8 percent retracement of the rally from the 2010 lows in a Fibonacci study, Tom Fitzpatrick, chief technical analyst at Citi FX, a part of Citigroup Capital Markets in New York, said in a note to clients today. The $76.17 price corresponds with the 76.4 percent retracement level on the Fibonacci chart...."
Sandra, il-Gvern qatt ma jrid jgħid minn fejn jixtri ż-żejt għax ma jridx juri kemm qed jisraqna. Min qallek il l-Gvern qed jixtri ż-żejt mill-Ewropa u mhux minn New York?
Mr John Borg
Aug 8th 2011, 17:21
Oil price fell but probably Enemalta will still increase fuel prices in Malta. Blaming it on some hedge policy it locked itself into.
David Philip Farrugia
Aug 8th 2011, 17:51
pathetic argument. The reality is that ' Europe's leaders have failed to tell their electorates the scale of the change that will be required. The public sector will have to be slashed. Spending on a whole range of desirable projects will be cut. The old Europe, so attached to its social welfare programmes, faces an uncomfortable decade. To bring in such unsettling change requires credibility - and many leaders like Berlusconi don't have it'.
Salvinu Buttigieg
Aug 8th 2011, 18:14
Most definitly its on the cards. glad i got rid of all my USDollars and changed to euros when the time was right.
Mr Alex Buds
Aug 8th 2011, 19:26
@ Salvinu Buttigieg... in case you didn't notice, Europe is not doing so hot itself right now.... the USA's biggest problem right now is probably the impact of the mess in Europe actually.
Salvinu Buttigieg
Aug 8th 2011, 19:34
You could be right Mr.Bud, however i am still glad i got rid of all the USD's, now a days a us dollar is work sod'll. at least with the euro i don;t have to loose any monies on the excahnge rate. the euro is regonized all over euro, but as far as the USD and GB£ NITTO>
Gordon Farrugia
Aug 8th 2011, 21:08
salvinu, i think you are being a tad bit naive i'm afraid. If Italy and Spain fall god knows where the EUR will end. At least the UK have their own currency.