It’s a small (financial) world after all

YASSER AL-ZAYYAT/AFP/Getty Images When Wall Street sneezes, does the world catch a cold? Based on a grim tour of financial markets around the globe, I’d say the answer is yes: In Russia, trading was shut down for a second day in a row to stop a tumble in markets, even after the central bank offered ...

By , International Crisis Group’s senior analyst for Colombia.
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YASSER AL-ZAYYAT/AFP/Getty Images

When Wall Street sneezes, does the world catch a cold? Based on a grim tour of financial markets around the globe, I'd say the answer is yes:

In Russia, trading was shut down for a second day in a row to stop a tumble in markets, even after the central bank offered the three largest banks $44 billion in loans. The fall dates back to the war in Georgia, during which $35 billion of foreign investment fled the markets, and even before then. In the Middle East, stocks fell also -- part of an ongoing downward trend in that region this year. 

YASSER AL-ZAYYAT/AFP/Getty Images

When Wall Street sneezes, does the world catch a cold? Based on a grim tour of financial markets around the globe, I’d say the answer is yes:

In Russia, trading was shut down for a second day in a row to stop a tumble in markets, even after the central bank offered the three largest banks $44 billion in loans. The fall dates back to the war in Georgia, during which $35 billion of foreign investment fled the markets, and even before then. In the Middle East, stocks fell also — part of an ongoing downward trend in that region this year. 

Shares of Britain’s largest mortgage lender, HBOS Plc, fell 52 percent, traders fearing that the lender might not have access to cash. Lloyds TBS bank might buy the troubled firm. European stocks fell, while three-month Libor (a common reference rate for the cost of borrowing in dollars) rose to its highest since 1999.

Japan‘s central bank injected over $29 billion into the financial system, while Australia’s central bank added another $3.5 billion in the name of reassuring investors. Korea and Singapore promised they were ready to step in and do the same if necessary. Despite the bailout of AIG, customers lined up across Asia to cancel their policies with the insurance company. An index of Chinese mainland stocks in Hong Kong took a 4.2 percent dive.

The Brazilian stock market hit its lowest mark since 2007 thanks to fears that lending would become more costly in the coming weeks. Markets in Chile, Argentina, and Colombia were also down. Home construction companies in Mexico also looked shaky. There are fears that Venezuela might default on its exchange rate.

So, to the anxious folks on Wall Street, take heart: You’re not alone.

See Also: Is It Time for the U.S. to Issue a Digital Dollar?

Elizabeth Dickinson is International Crisis Group’s senior analyst for Colombia.

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