Global Stock Markets Plunge on Doubts About US Economic Recovery

Posted September 22nd, 2011 at 9:01 am (UTC-5)
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Global stock markets plunged Thursday in reaction to the U.S. central bank’s dim prospects for the world’s largest economy and fears that its latest move to boost the economy will not prove effective.

Asian markets dropped sharply, and major European markets were all off more than 4 percent in midday trading. The price of crude oil slid more than 5 percent to its lowest point in more than four weeks on worries there would be less demand with a global economic downturn. Even the price of gold, often viewed as a safe haven for investors, fell quickly, but U.S. bonds were still viewed favorably as a protected investment.

The global stock selloff began after the U.S. central bank, the Federal Reserve, said it sees “significant downside risks” in the outlook for the American economy.

The Fed said a complete economic recovery is years away, and announced a plan to sell $400 billion of short-term bonds and buy long-term Treasury notes in an effort to keep interest rates low and boost economic growth. The central bank’s action had been expected.

Analysts said that the gloomy forecast for the U.S. economy, coupled with worries that Greece may eventually default on its international bailout loans, could lead to a new global downturn or at least continued sluggish growth.