Global equity markets underwent synchronized and massive sell-offs in August and early September. Equity prices worldwide declined on average by about 20 per cent from their peak levels a month ago. This has been the most severe sell-off since the recovery in asset prices starting in early 2009. Prices in commodity, currency and bonds markets showed large fluctuations.

 

The financial instability has emerged amidst growing fears of a double-dip recession in major developed economies and possible contagion effects of the sovereign debt crises in Europe. During the first half of 2011, economic growth has decelerated substantially in the United States. The economy of the euro zone has come to a virtual standstill, with the larger European economies now also on the brink of a new downturn. Japan has already been mired in a new recession since the end of 2010.