Global Stock Market Crash Could Trigger Economic Crisis
Panic among investors about a potential collapse of the international economy could trigger a collapse in itself if central banks do not take steps to create positive expectations among stock market participants, according to the British newspaper Financial Times (FT). Day.Az reports.
The global sell-off in stocks on August 5 was caused by panic among investors due to the Federal Reserve System (FRS) failing to announce a reduction in interest rates after the release of worse-than-expected US employment data. This extreme market reaction led to the highest volatility level since the beginning of the COVID-19 pandemic.
Economists quoted by the newspaper believe central banks need to mitigate the impact of the global decline in stock indices by creating positive expectations among investors through appropriate verbal statements, including at the upcoming symposium in Jackson Hole, Wyoming (August 22-24). This event will gather the heads of the world’s central banks to discuss issues related to monetary policy.
On Monday, the Nikkei index in Tokyo plunged by 12.4%, its biggest daily drop ever. Similar sharp drops were seen on the New York Stock Exchange, with the S&P 500 index down 3%, the Dow Jones down over 1,000 points, and the Nasdaq down 3.5%. This marked the worst trading session since September 2022.