Panic selling abated Monday morning in Israel and Europe as buyers snapped up unwanted stocks. Fool’s gold or not, real gold soared to $1,700 an ounce.
Asian stocks were down from 2-4 percent when their markets closed Monday morning Israeli time. The drop was an expected reaction to the reduction in credit rating of the United States from AAA to AA.
But the ”panic selling” was more in the headlines than in the markets. The declines were far less than the 7 percent drop in Tel Aviv Sunday and reflected, in part, domestic economies.
In contrast, European markets were up sharply Monday morning after an opening decline. The London “FTSE” index was up 0.66 percent mid-morning Monday, and Tel Aviv indices were up well over 2 percent, but the indices turned back into negative territory by early afternoon.
New York pre-opening indicators show a 1-2 percent decline is in store Monday, but the indicator often changes 180 degrees by the time of the opening bell in New York, which is seven hours behind Israel. The indicator was down by almost 3 percent earlier in the morning.
Gold soared by 3 percent to $1,705 an ounce while crude oil prices were down another 2 percent as panic sellers flee stocks and commodities.
When emotions dominate the market anything is possible. "Doom and gloomers" insist the sharp drop last week, on the heels of fears of a new worldwide recession, is only a harbinger of things to come.
Others think that while growth in the United States is slowing and the reduction in the credit rating is a black mark for the government, growth will continue at a slow rate and the change in credit ranking has no real significance beyond an embarrassment for the United States.
Regardless of what may be tomorrow, Monday’s trading indicates that the panic is over, at least for the time being, and that last week’s prices may have been a market bottom... maybe.