Black Monday (1987)

The Black Monday October 19, 1987 was the first stock market crash after the Second World War. The Dow Jones fell within a day by 22.6% (508 points), which represents the largest percentage of slipping within a day in its history. The fall quickly spread to all major international trading centers. By the end of October, the stock market courses in Australia had fallen by 41.8 %, Canada 22.5%, Hong Kong 45.8 %, and the United Kingdom to 26.4%.

It is still controversial, what causes led to this stock market crash because the crash as opposed to the risk of slipping after the attacks of 11 September 2001 was preceded by no drastic events. It is believed that several different reasons for " Black Monday " led.

The name is inspired by the name of Black Thursday for the New York crash of 24 October 1929, which ushered in the beginning of the world economic crisis.

The Dow Jones had almost doubled since 1985; However, in August 1987 there were increasing signs of a slowdown. So it failed the American government to control inflation and the overwhelming trade deficit ( in 1987 U.S. $ 152.1 billion ) into the handle. The uncertainty was reinforced when the U.S. central bank for the first time in three years raised the key interest rate for short term loans. The Dow Jones had lost since its high in August to 13 October 1987 in several jumps about 475 points.

There was also a growing uncertainty in the currency markets and a loss of confidence in the U.S. currency. The devaluation of the dollar in the wake of the Plaza Accord seemed initially stopped with the Louvre Accord in February 1987, the end of September there were rumors in the media, however, on a dispute within the G7 countries. On the Friday before the stock market crash of the dollar exchange rate fell abruptly to 1.77 DM. The uncertainty was reinforced by an article in the following Sunday edition of the New York Times, in which the then U.S. Treasury Secretary James Baker indirectly spoke out against further support of the dollar and thus threatened to fall further the dollar, if Germany not willing to compromise in the interest dispute show.

To the extent the stock market crash was a major factor in the increasing computerization of trading (Computer Exchange, Automated trading ). Since the early 1980 years, merchants turned increasingly computer for their portfolio strategies and usually the big banks had very similar systems for dynamic hedging. The extensive automation meant that within a short time after a first sale print was created, the hedging strategies either shares sold short ( short selling ) or short futures contracts and put options purchased on the futures exchanges. The amount of simultaneously incoming orders generated further selling pressure and there was a cascade effect.

Follow

On 20 October 1987, the Dow Jones fell initially further to 1739 points, the Nikkei in Japan slipped to 3383 points to 21910 points ( -14.9 %). On many exchanges, then the trading was briefly suspended; among other reasons, because the computer technology of the time was not up to the massive volume of orders. This gave the U.S. central bank time to pump liquidity into the market and to cushion the crash. In addition, companies began to buy back its own shares in order to support the exchange rate. At the end of the week, the Dow Jones was again priced at 1951 points.

15 months after the " Black Monday, " the Dow Jones had again reached 2247 points, its level before the stock market crash.