factors which make stock markets panic, Analysts Forecast

Indonesia stock info - factors which make stock markets panic, Analysts Forecast ; This week stock markets have reported a gigantic loss worth $2.5 trillion. Last time such a drastic decline was registered in November 2008 in the heat of the global financial crisis. The amount of loss is comparable with the size of the economy of a European state such as France, for example. Analysts say that this is not the end and the decline on stock market will continue.

There are several factors which make investors panic. First of all these are debt crises in Europe and in the US. The US managed to escape the default when the Republicans and Democrats agreed on the last moment to raise debt ceiling, but the problem with the debt growth remains unsolved. On Friday, the International rating agency Standard & Poor's has reduced the U.S.’s credit rating from AAA to AA+.

In Europe the number of troubled economies is growing. Now the creditworthiness of Italy, which is the third market of state bonds after US and Japan, is questionable. European financial problems have seriously affected global market, the leading analyst of the Finmarket Andrei Lusnikov stresses.

"In Europe market participants do not want to buy bonds of larger number of countries. A year ago it was only Greece, than Portugal and Ireland added and now the credibility of Italy and Spain is doubted. This is a very unfavorable background."

Later this week Cyprus joined the list of troubled economies. The problem is that local banks which assets exceed the country’s GDP hold Greece’s state bonds worth billion euros.

The situation worsened when a blast on the arsenal near Limasol went off on July 11 destroying the largest electric power plant on the island. The damage from the disaster is estimated at 2 billion euros while the expenditure part of Cyprus’ budget amounts to 8 billion. All this led to the resignation of the government. So far the new government is making optimist statements saying that Cyprus won’t need the financial aid from the EU.

The decline of indices continued Friday. The indices on Russia’s MICEX dropped 3%. In Europe, indices dropped by 12 % during the week. The US S&P index dropped 5% on Thursday though on Friday the markets saw a slight increase at the opening session.

Analysts say that investors first underestimated the graveness of the situation. Several months ago the prevailing opinion was that global economy slowly but steadily was recovering after the crisis. The negative economic events in Europe and the threat of default in the US were not regarded as the reasons to sell out assets. But now this attitude is changing, TBK Kapital analyst Alexander Kovalev says.

"Last two weeks saw several negative macroeconomic indicators first of all this concerns the US’ GDP. The figures of the 1st and 2nd quarters were reconsidered. The figures on industrial activities of China, Europe and US released this week also show a slowdown trend.

Indeed, this time even Asian markets were not an exception from the rule. Earlier Asia always was the carrier of an opposite trend, Vladimir Rozhankovaky director of analytical department of the Nord-Kapital company says.

"During the previous critical situations on the market Asian investors continued to buy assets. Now it has not happened. I can only attribute it to the fact that Asian investors are frightened by the current mess on the market. If there is an attack on a particular sort of assts for example oil Asia buys it. But when we see simultaneous decline everywhere Asian investors are also puzzled."

Now it is getting clear that West has run out of tools to make positive influence on the economy without carrying out systematic reforms. Experts are confident that the current global financial system is a vicious circle. That is why decline on stock markets is likely to continue.


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