What News Is Moving the Markets?

Stock markets in much of the world have shown sharp cumulative declines since around May 10, with most of the drop occurring in the two-week period to around May 23, but with prices continuing to fall on average since then. Does trouble in the world’s stock markets mean trouble for the world economy?

Let us look at the biggest declines. Of the major countries’ indexes, the biggest crash was in India, where stock prices fell 16.9% from May 10 to May 22. The debacle on the other side of the globe was almost as big and the peaks and troughs were within a day or two of those in India: in Argentina, stock prices fell 16.1%, in Brazil, they fell 14.7%, and in Mexico, they fell 13.8%.

European markets also suffered large losses. In Sweden, stock prices fell 15.2% between May 9 and May 22; over nearly the same period, prices fell 9.7% in Germany , 9.4% in France and the United Kingdom, and 9.3% in Italy. Likewise, in Asia, stock prices fell 11.5% in Korea, 9.3% in Hong Kong, and 8% in Japan from their respective peaks to troughs over very nearly the same time period.

Many commentators try to tie such events to developments the United States. But US stock prices fell only 5.2% between May 9 and May 24. Nor does China appear to be behind the global decline, since stock prices there actually rose during this period.