2008: The worst stock market year in recent decades
The international financial market crisis dictated events on the world's stock markets in 2008. At the very outset of the year massive write-downs taken in the portfolios of international financial institutions brought about a steep collapse on equity markets. News of the urgent need for capital at some US bond guarantors and German regional banks as well as the forced sale of the fifthlargest investment bank in the United States prompted further price declines in the first quarter of 2008.
In the wake of the reporting season on the fourth quarter of 2007 equity markets steadied thanks to positive signals until the end of May 2008, before growing fears of recession and reports about the funding needs of various financial institutions triggered a fresh downward slide. In mid-September news of the fire sale of another US investment bank, the looming collapse of the world's largest insurer and above all the insolvency of the fourth-largest US investment bank unleashed outright panic on the markets: despite moves by central banks to slash interest rates, the Dax and Dow Jones had shed 20% by the end of October, while the Nikkei 225 Index lost as much as 30%.
It was not until the start of November that extensive government guarantees, rescue packages and support measures by the US government, the German government and other nations succeeded in preventing a collapse of the global financial system. Disappointing quarterly figures posted by many companies, news of a contraction in gross domestic product in the United States, Germany and other countries as well as reports of rapidly shrinking order books nevertheless fanned fresh recession concerns. Finally, in December, a fraud scandal that erupted around an asset manager on a scale of some USD 50 billion rocked the international world of finance.
While the Dow Jones ended 2008 down by altogether 34%, the Dax closed the year under review some 40% lower at 4,810 points. The MDax gave back as much as 43% of its value to stand at 5,602 points at year-end.