And, the turmoil continuesin world markets.....

After few days of relief, world equity markets slumped anew amid no sign of a rebound in the US economy and lingering worries over the eurozone debt problems. The market turmoil was sparked by renewed fears of major financial upheavals in Europe, and growing concerns that the US might slipping into another recession. Morgan Stanley slashed its global growth outlook for 2011 and 2012, adding that the US and Europe are hovering dangerously close to a recession. The Wall Street bank estimates expansion of 3.9%, down from a previous forecast of 4.2%. Citigroup cut its 2011 GDP growth forecast for the US economy while Deutsche Bank lowered its outlook on China.



US equities slumped after a report showed that the Federal Reserve Bank of Philadelphia’s general economic index plunged to minus 30.7 this month, the lowest since March 2009, from 3.2 in July. The August gauge exceeded the most pessimistic projection. US government data also showed higher-than-expected weekly jobless claims by Americans last week, while consumer inflation climbed in July by the most in four months. Separately, the National Association of Realtors said that existing home sales unexpectedly dropped in July.

US banks tumbled, following losses in their European counterparts, as Sweden’s financial regulator said that his country’s lenders must do more to prepare for a worsening in Europe’s debt crisis. Banks also slumped after the Wall Street Journal reported that US regulators are intensifying scrutiny of the American arms of Europe’s largest banks amid concern about the region’s debt crisis.

The WSJ report came a day after data from the ECB showed an unnamed institution had borrowed US$500mn - the first time it had made such a dollar-denominated loan since February. Ewald Nowotny, a member of the European Central Bank’s governing council, said that he fears Europe could enter a long period of slow economic growth, like Japan witnessed in the 1990s.

Gold touched a new record high and Treasury bond yields tumbled to new all-time low. Investors rushed to move their money into safe US government bonds. Gold futures for December delivery rose above $1,850 an ounce, a new high (not adjusted for inflation) for the precious metal. The dollar gained against the euro, Japanese yen and the British pound. Oil for September delivery fell below $80 a barrel. The VIX - Wall Street's so-called fear gauge - jumped 35% to a reading of 42.7. Anything above 30 is considered panic. The VStoxx Index (V2X), which measures the cost of protecting against declines in the Euro Stoxx 50 Index, snapped a five-day losing streak. It also surged 35%, the most since May 2010, to 47.17. Volatility gauges in Hong Kong, South Korea, Japan and India also rose.