Monday, August 5, 2024: A Black Day for Global Stock Markets

A report by Lea Fayad, English adaptation by Nadine Sassine

Monday, August 5, 2024, marked a black day for global stock markets, which experienced a wave of panic and record declines. The wave started on Wall Street in the United States and extended to Europe and Asia. One of the main drivers was concern over negative indicators in the US economy.

What happened on Monday is not considered as severe as previous crises, as evidenced by the Dow Jones index only dropping 2.6%. However, it evoked memories of Black Monday on October 19, 1987, when the Dow Jones, for example, fell by 22.6%, causing global stock markets to collapse. This was also driven by concerns over the US economy and the declining value of the dollar.

This is not the only instance of a crash faced by the US stock market as it has encountered similar events that impacted global markets such as the Wall Street Crash of 1929, which affected stock markets in London and spread to Europe and other parts of the world, leading to the Great Depression, the dot-com bubble in 2000, which saw the collapse of internet company stocks, and the financial crisis of 2008, which started with the bankruptcy of Lehman Brothers and turned into a global crisis.

This raises the question: Why do US markets significantly influence global markets?

 

Firstly, the size of the US economy, the largest in the world, is seen by investors as a barometer for the stability and health of the global economy. Many tools and decisions made in the US, such as interest rates, are followed by other countries.

Secondly, the strength of the US dollar, the most traded currency in the world, accounts for 88% of global currency transactions and 60% of central banks' foreign reserves.

Thirdly, the growth and size of the US stock market compared to other markets, with the largest tech companies' stocks listed on it, are held by investors from around the world.