Black Monday
The Black Monday on 19th October 1987 was the first stock market crash after the Second World War . It started on the Hong Kong Stock Exchange and, after the stock exchanges in Western Europe opened, there a few hours later, again a few hours later on the stock exchanges in the USA and Canada and then also in Australia and New Zealand .
The Dow Jones fell 22.6% (508 points) within one day; this is the largest one-day percentage decrease in its history to date. By the end of October, share prices in Australia had fallen by 41.8%, in Canada by 22.5%, in Hong Kong by 45.8% and in the UK by 26.4%.
The name is based on the name Black Thursday for the New York crash of October 24, 1929, which ushered in the Great Depression.
August 8, 2011 is also called "Black Monday". On this day, the rating agency withdrew Standard & Poor's the United States , the creditworthiness top grade AAA .
Possible reasons
The Dow Jones had nearly doubled since 1985; in August 1987, however, there were increasing signs of an end to the bull market . The Reagan cabinet failed to get a grip on inflation and the excessive trade deficit (in 1987 it was 152.1 billion US dollars). Uncertainty increased when the US Federal Reserve raised the key rate on short-term loans for the first time in three years . The Dow Jones had lost about 475 points in several jumps from its high in August to October 13, 1987.
In addition, there was increasing uncertainty in the currency markets and a loss of confidence in the US dollar . The devaluation of the dollar in the course of the Plaza Agreement initially seemed to have stopped with the Louvre Agreement in February 1987, but at the end of September rumors of a dispute within the G7 countries surfaced in the media . On the Friday before the stock market crash, the dollar fell abruptly to DM 1.77 . The uncertainty was heightened by an article in the following Sunday edition of the New York Times , in which the then US Treasury Secretary James Baker indirectly spoke out against further support for the dollar and threatened to let the dollar fall even further if the German one did Government is not willing to compromise in the interest rate dispute.
The increasing computerization of stock exchange trading ( computer exchange , automated trading ) contributed to the extent of the stock market crash . Since the early 1980s, traders have been increasingly using computers for their portfolio strategies and, as a rule, the big banks had very similar systems for dynamic hedging. The extensive automation meant that within a short time, after the initial pressure to sell , the hedging strategies either short-sold shares or acquired short futures contracts and put options on the futures exchanges . The amount of simultaneously incoming orders created further selling pressure and a cascade effect occurred .
consequences
On October 20, 1987, the Dow Jones initially fell further to 1739 points, while the Nikkei 225 in Japan slipped by 14.9 percent (3383 points) to 21,910 points. As a result, trading on many stock exchanges was temporarily suspended; Among other things, because the computer technology of the time was not up to the high order volume. This gave the US Federal Reserve time to pump liquidity into the market and cushion the crash. In addition, companies began to buy back their own shares (either to support the price and / or to take advantage of the low prices as a buying opportunity). At the end of the week, the Dow Jones was trading at 1951 points.
15 months after "Black Monday", the Dow Jones reached 2247 points, its level before the stock market crash.
literature
- Friedhelm Busch : Never reach into a falling knife . Campus Verlag, Frankfurt am Main 1999, ISBN 3-593-36154-X , p. 13-43 .
Footnotes
- ↑ reuters.com August 8, 2011: Analysis: France, Britain AAA ratings under scrutiny