Debt, Recession Worries Bring Volatility to World Markets
11 August 2011
This is the VOA Special English Economics Report.
A "rollercoaster ride" is one description for these days of scary ups and downs in financial markets. If you want to use a more technical term, the markets are showing volatility.
Thursday was another example of a day of strong gains on the New York Stock Exchange after a day of heavy losses.
Major measures of United States markets have closed with their biggest one-day losses since the financial crisis of two thousand eight. Asia and Europe have also had sharp declines.
Volatile markets can react suddenly in wild and unpredictable ways. Usually some kind of shock, or more than one, is involved.
For example, last Friday, one of the three major credit rating agencies downgraded long-term United States government debt. Standard & Poor’s lowered its opinion of Treasury securities one step from the highest rating, triple-A, to AA-plus.
But shocks like a hopeful jobs report or good earnings results can stop a fall and send prices higher. Also, when prices fall, investors may find good deals and start buying.
The United States held S&P's top rating for seventy years and never had a downgrade. But many investors were expecting that to happen even after the budget deal in Washington. Congress last week agreed to increase the government's borrowing limit in return for steps to cut spending and reduce the deficit.
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