As a result of the US economic crisis, investors around the world last night withdrew stocks and placed their money in the relative safety of government bonds.
Concern is growing amongst investors that the US could face a recession in 2008 which would have a massive effect on the global economy as a whole.
“Global stock markets have been hit hard as investors are coming to realise that it will not be different this time and US economic weakness does matter,” says William O’Donnell, a strategist at UBS, in an interview with the Financial Times.
A report from the Organisation for Economic Co-operation and Development, which states that the US sub-prime market crisis could lead to losses of $300 billion will do nothing to restore investors’ confidence.
In the markets, the S&P 500 fell 1.3% and the S&P financials index fell 2.1% to its lowest level in two years. In London, the FTSE 100 fell 2.5% and the FTSE Eurofirst 300 index dropped 2.4%. The Hang Seng index took a dive of 4.2% and the Nikkei 222 dropped 2.5%.
In New York the index reached the levels arrived at when the credit crunch broke out.