20080121 trader frankfurt 18
A trader gestures today at Frankfurt, Germany's, stock exchange. European stock markets suffered a major sell-off, posting losses of 3-5 percent after sharp falls on Asian markets rattled by fears of recession in the United States. - 


TESS VIGELAND: You know those photos you see of Wall Street traders worriedly looking up at their trading screens whenever the markets take a big tumble? Well today's photos are similar, only the faces are from stock markets, and streets around the world. Germany's DAX suffered its biggest decline since the worldwide downturn on September 11 -- off more than 7 percent, Bombay a record 7.5 percent, Hong Kong 5.5 percent.

Some analysts blamed global disappointment over the Bush Administration's proposed stimulus plan, but as Marketplace's Stephen Beard reports from London, where the FTSE 100 finished down more than 5 percent, there may be other more alarming factors at work.

STEPHEN BEARD: This was a day that stockbrokers would rather forget: the worst slide in share prices since 9/11. The optimistic mood of more recent years has vanished. "We're in a bear market," says broker Howard Wheeldon.

HOWARD WHEELDON: The irrational exuberance that we had through 2002 to 2006 has been now replaced very firmly by irrational fear.

Investors were not reassured by President Bush's stimulus package. Too little, too late was a widespread comment today. Fears of a deep recession in the U.S. are growing, says analyst Richard Hunter.

RICHARD HUNTER: It's one of those questions of just how badly is the U.S. going to be hit, and what the market is saying today is that's going to have a fairly major impact on other global economies.

Markets were spooked by an even bigger worry about the so-called "monoline insurers." Among other things they insure against bonds going into default. A credit rating agency downgraded a big bond insurer last week. Stuart Fraser, of brokers Brewin Dolphin, says the fear is that widespread downgrades could trigger a full-blown banking crisis.

STUART FRASER: Whether or not that's right or wrong is another matter, but it certainly caused a feeling of panic because there is a feeling that really events will have to see themselves out, and that there's not much anybody can really do about it.

Today's panic, he says, was exacerbated by the U.S. holiday. He says there is a glimmer of hope that things may not seem quite so bad when the usually more optimistic American markets resume trading tomorrow.

In London, this is Stephen Beard for Marketplace.