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22nd September’11 – An added dark day for the world bourses

22nd September’11 – An added dark day for the world bourses

Is this the era, which was being assumed to be a dusk of the recession, turning out to be the dawn of a new one?

The pervasive 3% fall in Dow Jones, S&P 500 Index and NASDAQ – showcased a nightmare and a further alarm exposing the after effects of the recession and the slowdown. It is quite evident that the slowdown is still showing its effects in every nook and corner of the financial and economical scenario.

In the times when investors were hoping to see the advent of a new phase of only rises in the indices, they got a huge blow yesterday when all the markets of the world crashed.

The Event:

Dow Jones: It started at more than 11,000 points on Thursday morning after a fall on the wee hours of Wednesday. But the fall that started on Wednesday continued and it came down to 10,800 points just when the day had started. It failed to recover and closed at a little more than 10,700 points.  That was nearly a 3.5% fall, biggest since December 2008. The y-t-d fall of Dow Jones is nearly 7% till today.

S&P 500 Index: S&P witnessed a similar scenario when it went down to 1,135, much lower than 1,167 - the previous day’s close and closed at 1129 points. Even this was a 3% fall from Wednesdays close. The lowest it had gone was 1114; thankfully it rose a little above that during the day. The y-t-d fall of S&P 500 is 10% till now.

NASDAQ: NASDAQ did not encounter anything different or hopeful either.  The previous close was 2583 points and the day started off at comparatively very low of 2466 points. The day ended with 2450 points, a 3.25% fall.

No doubt, the day proved to be another perturbed September day for the US besides 9/11.

The Effects:

The flak spread through all the other exchanges world over.

In Europe FTSE 100 fell to 4.7% and CAC fell 5.3% while DAX dropped 5%.

Even Asia continued the league with SHCOMP falling 2.8%, Hang Seng 4.9% and Nikkei to 2.1% lower.

In Australia the S&P/ASX 200 fell 2.63% and the All Ordinaries index was 2.62% down.

The Reasons:

The main reason pointed out by experts was the Wednesday’s Federal announcement, which was coined as ‘Operation Twist’, informing that it will shift a whopping $400 billion from Treasury Security holdings in to long term debts. Very much like its previous endeavor of getting more bonds which did not shot off well. Due to the announcement the Treasury yields faced a historic dropdown of 1.72%. This did not prove to be of much help to the investors and economists as well. Even Oil and Gold market went through a tailspin with Crude Oil prices falling down by $5.41 per barrel and Gold prices fell down by 4%. The American Dollar was at seven month high. All this triggered the fall in the worldwide bourses.

The Inference:

With the omnipresent red signals blazing the markets, there is thin hope that the world has come out of the economic slowdown. After the recession in the US, the European debt crisis proved to be the deleterious torch bearer of the slack the finance world was experiencing. Now the torch is back in the hands of the US and their federal government which is doing all the possible things to kindle the torch all the more. Every step that the Fed has tried against the slowdown has reverted back building it all the more. But investors can change the picture. Considering this as just brief lull, the investors should think long term and give an opportunity to the markets to flourish and about-face to a virile green.