Fears that the United States is in a recession reverberated around the world on Monday, sending stock markets from Frankfurt to Mumbai into a tailspin and puncturing the hopes of many investors that Europe and Asia will be able to sidestep an American downturn.
The stock plunge drived from US Subprime Mortgages Crises. Last US New Century Financial Coorporation annouced bankruptcy, which stimulated the fear of huge loss of bank stocks and then the fear prevailed in other industries.
So what is Subprime Mortgage? It is one kind of Suboridinary debenture.It is a loan (or security) that ranks below other loans (or securities) with regard to claims on assets or earnings,also known as a “junior security” or “subordinated loan”.
In the case of default, creditors with subordinated debt wouldn’t get paid out until after the senior debtholders were paid in full. Therefore, subordinated debt is more risky than unsubordinated debt.
Subprime Mortgage is a kind of MBS, Mortgage backed security, some banks package some of their Housing Mortgage Credits as a kind of security and sell them to other finnancial institutions,then the crises and income will be disseminated in the same time.
Stock market is the symbol of world-is-flat, everybody is binding together.
So we saw more than 12% stock fall all around the world in 2 days.
