Financial crisis 2011 – a week of turmoilMarkets tumble as global economy fears spread

14 August 2011

Stock market crash

Stock markets have plummeted all over the world

It's been a turbulent week for global stock markets as concerns over debt in Europe and the US wreaked havoc for investors.

Since the beginning of August, the FTSE 100, the stock market measuring the performance of the UK's largest companies, has fallen by 11%. Meanwhile, the Dow Jones Industrial in the US is down 8%, the Dax in Germany has fallen by 16% and the Hang Seng in China is down by 13%. 

Fears over escalating debts in Europe and the downgrading of the US sent markets into a tailspin, culminating in a ban on short selling of shares in banks in four European states. Here, we provide a rundown in the global economy's summer of woe. 

Riots in the UK

The FTSE 100 fell 3% on Monday in reaction to the news that US had lost its prestigious AAA debt rating. From Tuesday through to Thursday, any respite was brief, with the index falling below 5,000 for the first time since July 2010.

While the UK's stock market was rough, the UK was beseiged with mass rioting in major cities across England, with damage to businesses, cars and homes estimated at £100 million. In spite of this, the Coalition Government reaffirmed its commitment to reducing the UK's deficit and retaining its austere spending plan.

Find out more about insurance coverage after the riots.

Europe in crisis

Monday saw the European Central Bank try to quell fears over the state of the Eurozone by announcing that it would buy up more government bonds of its heavily indebted nations. That brought little relief to the markets, which has seen the French Cac 40 fall by 14% since the beginning of August and the German Dax fall by 16%. 

In particular, sharp falls in the share price of Italy's Unicredit bank and France's Societe Generale led European regulators to announce a ban on shortselling of financial shares, which has, temporarily seen markets rise again.

But Europe is not out of the woods yet. On Friday, France announced stagnant growth while Greece reported a 6.9% contraction in its economy. 

US recovery doubts

The US was rocked by the decision of Standard and Poors' to downgrade its debt from AAA to AA+. The move, a knock-on effect from America's spiralling £14 trillion deficit and its lawmakers' inability to agree upon raising the debt ceiling in time, rattled markets throughout the world, and has been seen by some as irresponsible, given the current economic climate.

However, markets have bounced back on the news of lower than expected unemployment figures in the US and the highest retail sales figures in four months. 

Gold continues to rocket

The price of the precious metal continues to soar, as the ultimate save haven rose to $1,768 per ounce on Wednesday. Some are now predicting that the price could go to $2,500 per ounce by Christmas this year.

To find out more about buying and selling the precious metal, read our 60 second guide to gold as an investment.

If you're concerned about the stock market turbulence of the last week, see how the current economic crisis might affect you

pound coins

Which? Money when you need it

You can follow @WhichMoney on Twitter to keep up-to-date with our Best Rates and Recommended Provider product and service reviews.

Sign up for the latest money news, best rates and recommended providers in your newsletter every Friday.

Or for money-saving tips, and news of how what's going on in the world of finance affects you, join Melanie Dowding and James Daley for the Which? Money weekly money podcast

For daily consumer news, subscribe to the Which? news RSS feed here. And to find out how we work for you on money issues, visit our personal finance campaigns pages.