'Death spiral' fears for world markets

Last Modified: 10 Oct 2008
By: Faisal Islam

World credit has seized up from Tokyo to London, from Frankfurt to New York. Is the world on the verge of a global recession?

The London stocks lost 10 per cent in seven minutes this morning. It just shows that the markets have lost all confidence.

Bewilderment was suffused with sadness: sadness over the inevitable impact upon real people, real jobs, and real homes.

Share prices have fallen so low that we are in what is known as a "death spiral", where shares are sold automatically because they have hit "stoploss" the moment at which their holders insist they must be sold whatever the circumstances.

Can anything halt the panic?

Markets tumble

The panicked rush to sell started last night on Wall Street and swept through Japan, China, India and Europe before returning to rekindle the fire in New York.

It is without precedent, the speed and scale has outstripped anything that traders have seen.

And the implications extend from recession to depression. The losses were universal and hit the new vibrant economies of the east as hard as the old ones in the west.

Stock markets across the world tumbled today as panic gripped the dealing rooms. The bloodbath started on Wall Street before crossing to Asia and then on to the FTSE.

The speed of the drop was dizzying:

Last night the Dow Jones plummeted, closing down more than 7 per cent.
In Tokyo, the Nikkei index plunged in its biggest one-day drop since the 1987 market crash, closing down 9.6 per cent.
The German DAX closed 7 per cent down. And, here, the FTSE 100 closed almost 9 per cent down.
In the worst week on the FTSE since the 1987 crash, it lost a staggering £250bn.

Monday's opening figure of almost 5000 points plummeted to below 4,000 by today's close.

In one seven-minute period this morning, it lost a shocking and unprecedented 10 per cent of its value.