PoliGazette

IN what’s becoming old news quickly, stock markets in Europe and Asia continue to go down. The talk of a recession in the US is doing damage before it truly arrives.

 The New York Times reports that “[s]tock markets across Asia plunged even farther and faster on Tuesday than on Monday — while stock markets in Europe also opened with further losses on Tuesday — as anxious sellers dumped huge numbers of shares on worries that an economic slowdown in the United States could drag down growth around the world.”

Once Asian markets opened, people started selling their stocks for all it’s worth. The result: “The Japanese stock market dropped 5.7 percent, for the worst two-day loss in 17 years, while the Australian stock market tumbled 7.05 percent, its worst single-day loss in nearly two decades. The Shanghai market lost 7.22 percent while the Hang Seng index in Hong Kong plummeted 8.65 percent.”

Kwong Man Bun, the chief operating officer of KGI Asia Ltd., a large Asian futures broker said that the bottom of the market isn’t in sight yet. “The index will continue to go down and will only find its bottom when external markets — namely, the U.S. market — stabilize,” he said.

And Europe? “European stock indexes opened with losses of 2 to 5 percent, extending a steep slump that pushed some indexes down more than 7 percent on Monday.”

Perhaps the biggest loser, though, is India. “ Trading on the Bombay Stock Exchange was halted for an hour on Tuesday after the Sensex index dropped 11.5 percent shortly after the opening .” When it was reopened “the Sensex fell to more than 12 percent below Monday’s close. It improved slightly by late afternoon to show a loss of 8.38 percent.”

This despite comforting words of Finance Minister P. Chidambaram of India, who said: “My advice to investors is to stay calm.” He added that “India’s economy was slated to grow 9 percent this year and 8.5 percent next year.”

Sadly, what we see right now hasn’t got anything to do with whether or not India’s economy will continue to grow. Nor with Reason. It’s all about emotions right now. The stock markets will continue to fall as long as people continue to panic. This is something we see time and again: talk of a recession or slowdown leads to a recession or slow down and quicker than most people anticipated, simply because people panic and sell their stocks en masse.