Asian stocks fell more than 5 percent Friday, after the worst day on Wall Street since December 2008.
European credibility seems to be the issue. Investors are increasingly edgy over whether EU policymakers can agree on how to ease the debt crisis.
The stock market is tanking. At midday Aug. 4, the Dow had fallen 300 points. The bond market is also beginning to growl like a bear. Investors are buying long-dated bonds while eschewing shorter-term securities to protect their assets, a clear indication that they feel the economy is likely to weaken further. High-profile economists are also turning gloomy. Former Treasury Secretary Lawrence Summers put the chances of another recession at 1-in-3; Harvard economist Martin Feldstein put it at 1-in-2. What's behind all the pessimism? Here are four big factors that are weighing on stocks and could determine the course of the global economy in the coming months:
Debt limit deal causes jump for stocks in Asia and stock futures in US. But big cuts from second step of debt limit plan would be needed for a durable rally.
Debt plan compromise is reportedly close, which could give global markets a bounce. A default would add huge stress to already slumping markets.
With Washington locked in a debt-ceiling stalemate, debt seems to be on everyone’s mind. So, how does US debt compare with that of European countries, embroiled in a debt crisis of their own? In April, the International Monetary Fund estimated that the US government's gross debt amounted to 99 percent of gross domestic product. That’s high, but less than four of Europe's five largest debtors. Editor’s note: All figures are come from International Monetary Fund’s World Economic Outlook database that was updated in April 2011. See the full statistics here.
Bond market debacle seems unlikely, many foreign officials say. But bond market could see loss of America's Triple A rating if there are no big budget cuts long term.
With the possibility of America defaulting on a debt payment just days away, Americans are hoping for the best but bracing for the worst. Lawmakers are raising alarms. Some investors are scrambling to the safety of gold and foreign currencies. What would a US default mean for the American consumer? Here are five ways it would hit your pocketbook:
European leaders in Brussels today agreed to a deal for Greece that includes $156 billion in aid, private investors, and extending the maturity period on Greek bonds.