Black Monday; stock markets crash around the world (1987)

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Thursday, 19 October 2017

1987 -

October 19, 1987 is referred to as Black Monday because financial stock markets severely crashed, all around the world. It already started the week before, when stock markets in Asia dropped. It spread to European stock markets and eventually infected the United States. On Monday The Dow Jones Industrial Average fell 500 points. World’s most influential stock market lost more than a quarter of its value.

A surprise
Nobody really saw it coming. Economy rapidly recovered from the recession in the early 1980’s. It landed softly in 1985; economy slowed and inflation dropped but looking back at it, economists blame several causes for the crash. Interest increased and overvaluation occurred. A popular explanation for the crash was selling by program traders. Computers performing rapid stock executions, based on external inputs. The Black Monday decline was the largest one-day percentage decline in the Dow Jones Industrial Average.

Trading curbs
Investors were surprised that it took the financial market only two years to recover. For comparison: The stock market crash of 1929 was overcome after 25 years. Traders suspect that a crash like the one in 1987 can’t happen again, because rules were developed after Black Monday. The rules are known as ‘trading curbs’. For instance; exchanges are allowed to temporarily halt trading, in instances of exceptionally large price declines in some indexes.

360 trivial fact
In New Zealand and Australia Black Monday is referred to as Black Tuesday, because of the time difference.


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