On Wednesday, stock markets in Europe and around the world plunged on speculation that France would lose its triple (AAA) credit rating and fears of a slowing economy worldwide. On Tuesday, The financial markets skyrocket up on Tuesday, after Federal Reserve Chairman Ben Bernake said the Federal Reserve will not raise interest rates and continue it current policy until 2013. From The Wall Street Journal:
Stock prices tumbled Wednesday, led downward by some of the world’s biggest banks. But bond investors offered a potentially more ominous assessment of prospects for the global economy, pouring money into the safety of U.S. Treasury bonds despite yields that are near their lowest levels in history.
The Dow Jones Industrial Average fell 519.83 points, or 4.62% to 10719.94, more than wiping out the gains posted in Tuesday’s sizable late-day rally. It was the Dow’s fourth triple-digit move in five days and brings its declines since its April peak to more than 16%. The index is less than 500 points away from officially being in a bear market, defined as a decline of 20%.
Asian shares Thursday morning moved lower. Japan’s Nikkei Stock Average fell 1.6%; Australia’s S&P/ASX 200 lost 1.4%; South Korea’s Kospi Composite dropped 1.8% after slumping over 4% at the opening; and New Zealand’s NZX-50 was 0.1% lower.
It marked the fourth day in August that the Dow has closed more than 2% higher or lower. Only one of those sessions, Tuesday’s, was a positive move. In contrast, there were only two days with moves of 2% or more in the first seven months of the year.
The concerns have led to strong demand for Treasurys, despite the downgrade by Standard & Poor’s of the U.S. long-term credit rating last Friday. The trend of falling Treasury yields gained steam following the Fed’s announcement Tuesday that it would keep interest rates “exceptionally low” though the middle of 2013. Yields on 10-year Treasurys, which fall as prices rise, ended the day at 2.145%, near their lowest on record.
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