Markets Plunge On Worries About A Wold Economy Slowdown

Aug 18, 2011

Just when you thought the markets had stabilized, it looks like today will bring another rough and tumble day on Wall Street.

The Dow plunged 500 points, more than 4 percent, in early trading, while the S&P was down 4.5 percent and Nasdaq was down close to 5 percent.

The tumble follows a poor day for world markets. ABC News reports the selloff comes in response to worries about the stability of European lenders and worries about a world economic slowdown:

Investment bank Morgan Stanley cut its global growth forecast for the year to 3.9 percent, down from a previous forecast of 4.2 percent. The bank cited an "insufficient" policy response to Europe's sovereign debt woes and the possibility of fiscal tightening that could make it harder for businesses to borrow.

Morgan Stanley, which also cut its China growth forecast for next year, wrote that the U.S. and Europe are "dangerously close to recession."

The report stated: "Recent policy errors, especially Europe's slow and insufficient response to the sovereign crisis and the drama around lifting the U.S. debt ceiling, have weighed down on financial markets and eroded business and consumer confidence."

The New York Times reports that with the bad economic news investors turned to U.S. Treasuries. The 10-year note, reports the Times, "fell to a record low."

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