Finance & economics | Cigarettes, coffee and panic

The stockmarket rout may not be over

As investors pause for breath, we assess what could turn a correction into a crash

Illustration of a laptop displaying a red line graph. Next to the laptop is a stack of dirty coffee cups with spoons and an ashtray filled with cigarette butts, set against a yellow background.
Illustration: Alberto Miranda

For a while on August 5th things were looking truly awful. During the Asian trading session Japan’s benchmark Topix share index had fallen by 12%, marking its worst day since 1987. Stocks in South Korea and Taiwan had tanked by 9% and 8% respectively, and European markets were faltering. Before trading began in America, the VIX index, which measures how wildly traders expect share prices to swing, was at a level it had reached only early during the covid-19 pandemic and after Lehman Brothers collapsed in 2008 (see chart 1). Ominously, though gold is usually a hedge against chaos, its price was falling—suggesting that investors might be selling assets they would rather hold on to in order to stay afloat. The previous week’s rout in global markets seemed to be spiralling into a full-blown crisis.

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This article appeared in the Finance & economics section of the print edition under the headline “Cigarettes, coffee and panic”

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