Markets bomb on talk of US recession

Global markets have witnessed significant turbulence over the weekend as investors raised concerns the full effects of the US housing downturn and sub-prime crisis have yet to be felt.

Markets in the US nose-dived on Friday, the 20th anniversary of the Black Monday market crash, with the Dow Jones seeing more than 2.6% wiped off stock and the S&P index losing 2.5% of its value.

Caterpillar triggered the fall in prices as it announced cuts to its profit forecast. The firm said the US economy would be close to recession next year and may actually experience a recession.

One analyst said the lack of economic data available up until Christmas will mean markets are driven by sentiment, which is becoming increasingly pessimistic.

Following the onset of global credit problems in August, markets had mostly regained the ground lost, with the Dow Jones reaching record levels a few weeks ago. However, the problems had spread to European and Asian markets this morning with the FTSE 100 down 1.2% and the Nikkei 225 losing 2.2%.

Analysts are worried a repeat of Black Monday, when the Dow Jones lost 23% of its value, could be around the corner as economies across the developed world begin to slow down.

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