The Dow plunged nearly 832 points on Wednesday, the third-worst point decline in history
Bursa plunges at opening in face of global weakness
Bursa Malaysia extended its losses at the opening today in line with Wall Street’s weaker performance overnight on concerns over global growth prospects.
Bursa plunges at opening in face of global weakness
Malaysian stock market braces for turbulence as budget loomsFive months after the surprise election win by Prime Minister Tun Dr Mahathir Mohamad, investors in Malaysia’s stock market may finally be coming to grips that there will be more pain before any gain in the months ahead. Volatility in Malaysian stocks jumped to its highest since June and the FTSE Bursa Malaysia KLCI Index extended its decline by another 2.6% on Thursday following a 2.2% plunge the previous day. That’s after Dr Mahathir said at an Oct 9 forum that the government will devise new taxes soon to shore up a state budget that’s been constrained by debt and changes to the consumption levy. “There’s some uncertainty around policy changes from the government that can lead the market to be volatile in the near term,” said Ivy Ng Lee Fang, head of Malaysia research at CIMB Investment Bank Bhd in Kuala Lumpur. “These are not new as the government has given the same guidance before,” she said.
The US market plunged overnight following a sharp decline in technology counters amid concerns over rising interest rates. Similarly, European stocks suffered huge losses led by technology and mining counters.Dow falls 832 points in third-worst day by points ever The Dow plunged nearly 832 points on Wednesday, the third-worst point decline in history. All 30 Dow stocks were in the red, sending the index below 26,000 points for the first time in a month. The index fell by more than 3%. The S&P 500 posted its fifth straight decline, plummeting nearly 3.3%. And tech stocks got hit particularly hard. The Nasdaq dropped more than 4% in the worst percentage decline since June 2016. International markets followed the downward trend. The Nikkei was down more than 3% in morning trading Thursday. Stocks are in the midst of a scary October slump, sliding sharply because investors are worried about rising interest rates. October has often been a nerve-racking month for investors, and this month is living up to that reputation. All three indexes are in the red this month. But the Nasdaq has really taken it on the chin: It has plunged nearly 8% already in October. The Dow’s point decline was the worst since February, when the index fell by more than 1,000 — twice. The Dow’s percentage decline doesn’t crack the top percentage declines. The index fell 23% in 1914 and on “Black Monday” in 1987. The Technology Select Sector SPDR Fund, a proxy for the tech sector, plunged 4.85%. That hadn’t happened since August 2011.
The beginnings of another financial crisis are already in motion – and it will be worse than the global meltdown of 2008.That’s the opinion of one of the select band of economists who predicted the 2008 economic collapse, which started with the bankruptcy of Lehman Brothers bank a decade ago and ended up affecting every country in the world. Ann Pettifor predicted that crisis in 2006, more than two years before it actually struck. Now she thinks the global economy is in danger once more thanks to huge corporate debt, and the prospect of rising interest rates in the United States. She told Sky News that global debt was now more than three times the level of global GDP. “So naturally it is not going to be repaid, and naturally there is going to come a point when that debt triggers the next crisis. And, for me, that trigger is going to be high rates of interest,” she said. “We’re seeing that companies who borrowed too much money at very low rates of interest are now finding the value of their collateral falling. Their debt is rising and the interest on that debt is rising too.” What’s more, she thinks the process has already started. She said: “I think it will be worse than the last crisis because we don’t have the tools. It will be really difficult to start pumping out quantitative easing, buying back all those assets. “Already the new crisis has begun to roll.” Her warning is echoed by others. In an exclusive interview, Tom Russo, former managing director of Lehman Brothers, told Sky News “the seeds of the next crisis are probably already being watered right now”. He puts the focus on the process of leverage – a measure of corporate debt. “I think it’s probably going to be the same fundamental issue of leverage that we had 10 years ago,” he said. “We have a national GDP of $20tn, but debt of $21tn. Our national debt is growing by $1tn per year. “We keep on promising things to people without the means to pay for it. It will just become harder and harder to deal with it.”
Historian Who Predicted the 2008 Financial Crisis Warns the Next Recession Is NearNiall Ferguson, a famed historian and a frequent guest of the world’s most elite events, is one of the prophets credited with accurately predicting the 2008 Financial Crisis. Back in June 2006, he warned that “over the next two years, the monthly payments on about $600 billion of mortgages taken out by borrowers in the so-called subprime market… will increase by as much as 50 percent.” A decade has passed since the music stopped on Wall Street. With economic growth steady and the unemployment rate low, however, Ferguson warns that another financial crisis is closer than optimists would like to believe. “The post-crisis period is over. What we’re moving into now, perhaps, is a new pre-crisis period,” he said during a recent interview in The Wealth Report published annually by property firms Douglas Elliman and Knight Frank. One curious reason a new recession may be imminent is that the previous crisis ended too fast. “I underestimated the ability of the central banks, particularly the Federal Reserve, to counter what was potentially a catastrophic chain reaction, which they did first by cutting interest rates to zero, and then by engaging in quantitative easing,” Ferguson said. “One of the direct consequences was that all kinds of financial assets recovered in price, and we didn’t go into a depression. People who held on to their stocks as well as their bonds, not to mention their real estate, were made whole remarkably quickly. It was almost like a bad dream, and now it’s over and we’re all cheerful again,” he said. Since 2008, the percentage of corporate debt in total GDP has skyrocketed. Reuters analysts estimate that two-thirds of the borrowers are China’s state-owned enterprises, many of which are unprofitable (and have no incentives to be profitable). Thats means that many of these overly-leveraged companies will likely not be able to repay the debt.
Next Financial Crisis Could Be the Mother of All Crises – George SorosWell-Known Investors Are Warning of a Financial Crisis Even financial mavens are now warning of a looming financial crisis. Just recently, at the European Council on Foreign Relations, well-known investor George Soros said that, “We may be heading for another major financial crisis.” (Source: “George Soros is worried about another financial crisis,” CNN, May 29, 2018.) A surging dollar and a capital flight from emerging markets may lead to another “major” financial crisis, investor George Soros said, warning the European Union that it’s facing an imminent existential threat. The “termination” of the nuclear deal with Iran and the “destruction” of the transatlantic alliance between the EU and the U.S. are “bound to have a negative effect on the European economy and cause other dislocations,” including a devaluing of emerging-market currencies, Soros said in a speech in Paris on Tuesday. “We may be heading for another major financial crisis.” The stark warning from the billionaire money manager comes as Italian bond yields have jumped to multi-year highs and major emerging economies including Turkey and Argentina are struggling to contain the fallout from runaway inflation. Soros, who has been the object of ire by the government of his native Hungary, saved his gloomiest outlook for the EU. “Everything that could go wrong has gone wrong,” he said, citing the refugee crisis and austerity policies that catapulted populists into power, as well as “territorial disintegration” exemplified by Brexit. “It is no longer a figure of speech to say that Europe is in existential danger; it is the harsh reality,” he said.