Egypt plans gold fund law, seeks to become regional refining hub    Egyptian pound dips against US dollar in early Thursday trade    Egypt's electricity minister, Copelouzos Group discuss progress on Egypt–Greece power interconnection    Renowned Egyptian novelist Sonallah Ibrahim dies at 88    Prime Developments, Osoul for Tourism Development launch EGP 1.25bn CLAN project in Hurghada    Egypt's FM discusses Gaza, bilateral ties in calls with Saudi, South African counterparts    Total financing by FRA-regulated entities hits EGP 640.1bn in June 2025    Egypt, Saudi Arabia reject Israeli plan to occupy Gaza    Egypt prepares to tackle seasonal air pollution in Nile Delta    27 Western countries issue joint call for unimpeded aid access to Gaza    Egyptian, Ugandan Presidents open business forum to boost trade    Al-Sisi says any party thinking Egypt will neglect water rights is 'completely mistaken'    Egypt's Sisi warns against unilateral Nile measures, reaffirms Egypt's water security stance    Egypt's Sisi, Uganda's Museveni discuss boosting ties    Egypt, Colombia discuss medical support for Palestinians injured in Gaza    Australia to recognise Palestinian state in September, New Zealand to decide    Egypt, Huawei explore healthcare digital transformation cooperation    Global matcha market to surpass $7bn by 2030: Nutrition expert    Egypt's Sisi, Sudan's Idris discuss strategic ties, stability    Egypt's govt. issues licensing controls for used cooking oil activities    Egypt to inaugurate Grand Egyptian Museum on 1 November    Oil rises on Wednesday    Egypt, Uganda strengthen water cooperation, address Nile governance    Egypt's Sisi: Egypt is gateway for aid to Gaza, not displacement    Egypt, Malawi explore pharmaceutical cooperation, export opportunities    Korean Cultural Centre in Cairo launches folk painting workshop    Greco-Roman rock-cut tombs unearthed in Egypt's Aswan    Egypt reveals heritage e-training portal    Sisi launches new support initiative for families of war, terrorism victims    Egypt expands e-ticketing to 110 heritage sites, adds self-service kiosks at Saqqara    Palm Hills Squash Open debuts with 48 international stars, $250,000 prize pool    On Sport to broadcast Pan Arab Golf Championship for Juniors and Ladies in Egypt    Golf Festival in Cairo to mark Arab Golf Federation's 50th anniversary    Germany among EU's priciest labour markets – official data    Paris Olympic gold '24 medals hit record value    A minute of silence for Egyptian sports    Russia says it's in sync with US, China, Pakistan on Taliban    It's a bit frustrating to draw at home: Real Madrid keeper after Villarreal game    Shoukry reviews with Guterres Egypt's efforts to achieve SDGs, promote human rights    Sudan says countries must cooperate on vaccines    Johnson & Johnson: Second shot boosts antibodies and protection against COVID-19    Egypt to tax bloggers, YouTubers    Egypt's FM asserts importance of stability in Libya, holding elections as scheduled    We mustn't lose touch: Muller after Bayern win in Bundesliga    Egypt records 36 new deaths from Covid-19, highest since mid June    Egypt sells $3 bln US-dollar dominated eurobonds    Gamal Hanafy's ceramic exhibition at Gezira Arts Centre is a must go    Italian Institute Director Davide Scalmani presents activities of the Cairo Institute for ITALIANA.IT platform    







Thank you for reporting!
This image will be automatically disabled when it gets reported by several people.



Questions and answers about the market's turmoil
Here are some questions and answers about the market's turmoil Monday
Published in Ahram Online on 08 - 08 - 2011

Global stock markets tumbled Monday on the first trading day since Standard & Poor's downgraded long-term U.S. debt. The plunge came as investors grew anxious over a weakening U.S. economy and a widening debt crisis in Europe.
Not everything went as expected. Some analysts had worried that Treasury yields would surge after S&P's downgrade. That would happen if investors demanded higher returns to compensate for their risk. The opposite happened. Treasury yields dropped Monday as investors sought a safe place for their cash. Their actions showed continued confidence in long-term U.S. debt.
Q: Why are stock prices plunging?
A: Stocks are considered risky, especially when the economy falters. When the economy is growing, companies can expand, hire and increase profits. A string of bad economic data has led many investors to worry that the economy will dip back into recession. If that happens, stocks would likely slide further. Investors already were growing fearful about the economy before S&P's announcement Friday night. Oil prices also are falling, a sign that traders expect the weak economy to limit demand from consumers and businesses.
Q: If everyone is selling stocks, where's that money going?
A: Anywhere safe. Traders are plowing cash into investments that are seen as hedges against economic weakness. Gold prices streaked past $1,700 for the first time Monday. And the yields on debt issued by the U.S. Treasury fell as traders, money managers and overseas banks sought refuge from the market's wild swings. Bond yields fall as their prices rise.
Q: Why are Treasury prices rising? Didn't S&P just indicate that they are a riskier investment?
A: Investors remain confident that the Treasury will be able to pay its creditors, downgrade or not. And Treasurys are still the world standard for safe, stable investments that can be converted into cash easily. Other nations with AAA ratings have much smaller economies and issue much less debt. When investors seek safety, they don't have many options other than Treasurys.
Q: If the S&P downgrade isn't driving all this selling, why are markets plunging now? After all, the economic data was relatively encouraging on Thursday, when the Dow had its worst one-day point drop since 2008.
A: Things are looking grim in Europe. Central bankers there are trying to prevent Italy and Spain from becoming the latest nations to default on their debts. The European Central Bank on Monday is buying up bonds issued by those countries, to increase demand for them. A default by Spain or Italy would be disastrous for other nations that use the euro and could affect financial companies worldwide.


Clic here to read the story from its source.