Panic sparks plunge in global markets

Global equities plunged on Jan. 21 as investor concerns over the economic outlook and financial market turbulence snowballed into a sweeping sell-off. Tumbling Asian shares–which continued to fall the next day–led European stock markets into their biggest one-day fall since 9/11 as the prospect of a US recession and further fall-out from credit market turmoil prompted near panic among investors, who rushed to the safety of government bonds. About $490 billion was wiped off the market value of Europe's FTSE Eurofirst 300 index and $148 billion from the FTSE 100 index in London, which suffered its biggest points slide since it was formed in 1983. Germany's Xetra Dax slumped 7.2 percent to 6,790.19 and France's CAC-40 fell 6.8 percent to 4,744.45, its worst one-day percentage point fall since Sept. 11, 2001. "Sept. 11 aside, I can't remember a day like this. It was carnage," said Jimmy Yates, a dealer at CMC Markets in London. "What we are seeing now has the hallmarks of both a financial shock and the beginning of a [US] recession, or at least of growth grinding to a halt," said Credit Suisse's fixed income strategy team in a research note. Despite the dramatic falls, many believe there may be worse to come. "We believe the trough is not reached yet," said Teun Draaisma, European equity strategist at Morgan Stanley. In Asia, Indian shares on Jan. 21 ended 7.4 percent lower, and trading was halted in Mumbai after the market fell 9.8 percent in the opening minutes; Hong Kong closed down 5.5 percent; and Japan's Nikkei average slid nearly 4 percent, falling a further 4.4 percent while South Korea's Kospi index lost a further 3.9 percent. In the morning session on Jan. 22, Hong Kong skidded another 8 percent while Shanghai was down over 4 percent. Indonesian shares sank 8 percent in morning action. "In the past few weeks, the froth had been knocked off the markets but we haven't seen real pain–until today," said Ian Harnett, managing director of Absolute Strategy Research. Additional reporting by Krishna Guha and Saskia Scholtes in New York, Jamil Anderlini in Beijing, Geoff Dyer in Shanghai and Lindsay Whipp in Tokyo