(Ecns.cn) -- Following last week's "Black Thursday" in the U.S. and European stock markets, global financial market chaos has emerged out of fear of another recession. On August 4, the Dow Jones Industrial Average (DJI) fell a whopping 512 points to 11,383, its deepest decline since December 2008.
Across the financial markets, the day was reminiscent of the wild swings that defined the financial crisis in September and October three years ago. Gold prices briefly hit a record high; oil fell even more than stocks – 6%, or $5.30 a barrel; and frightened investors were so desperate to get into government bonds they were willing to accept almost no return on their money.
China's stock market affected
Thursday's decline of 512 points was the ninth worst for the Dow. In addition, the Standard & Poor's 500 Index (SPX) fell 60 points to 1,200, and the Nasdaq Composite Index (RIXF) plunged 136 points to 2,556. These reflect declines of 4.3%, 4.8% and 5.1% respectively in one day.
"There's a lot of uncertainty here," said Howard Silverblatt, senior index analyst at S&P, who listed as an emerging concern the idea that corporations might have to scale back expectations for the third quarter. He added, "If the Street numbers are too high, with the third quarter projected at record levels – if that has to be taken down at the last minute –the last remaining support beam is being pulled away."
European stocks also fell sharply to a two-year low on worries that Italy or Spain might require help from the European Union. The bank shares were caught in a squeeze, causing Barclays to plunge 7.8%, UBS 6.4% and UniCredit 9.3%. The FTSEurofirst 300 Index dropped 3.3% to 993, falling through the 1,000 point critical bottom for the first time in the past 12 months.
Affected by the decline of U.S. and European stocks, Asian stock markets also succumbed to heavy selling Friday. Japan's Nikkei 225 Index opened down about 2%; Australia's S&P/ASX 200 Index lost 2% from the start; and South Korea's Kospi Composite Index sank 4% at opening.
In China, the Shanghai Composite Index opened at 2,620, down 2.4%, and the Shenzhen Component Index lost 348 points from the morning start, down 2.9% on August 5. At Friday's close, the Shanghai and Shenzhen indexes declined 2.15% and 1.95% respectively.
According to Han Zhiguo, professor and head of the Beijing Bond and Wealth Research Institute, the decline of the U.S. stock market on Thursday could match the notorious decline on the day when the subprime crisis burst out in 2008. Now both the U.S. and Europe are facing serious debt problems. He said, "If this continues, 2012 may be a disastrous year for the global economy, and the euro zone is likely to disintegrate in 2012. This will also affect China in a global sense."
Han said it is now very difficult to solve the European debt crisis because the need for capital is an unaffordable challenge for these countries, and the crisis may last 10 more years. The European Central Bank has already resumed bond purchases to keep the region's debt crisis from expanding. Furthermore, the relief fund to Greece was far from enough, and the inability to pay its debt may expand to other European countries.
