Dow Jones takes steepest dive since Dec 2008; gold now a record US$1770 an ounce; experts fear policymakers do not have the financial or political clout to combat a second global recession; Chinese inflation at 6.5 per cent; US wants talks with North Korea to decide how to search for US soldiers killed there during the Korean War; 16,000 police will be on London streets to combat riots, says Cameron; US pledges $105 million for famine relief in Horn of Africa; and more

Top of the Agenda: U.S. Downgrade Sparks Global Sell-Off

The downgrade of the United States' long-held AAA credit rating ignited a global sell-off, as Wall Street's Dow Jones Industrial Average dropped 5.5 percent Monday in its steepest (WSJ) one-day decline since December 2008.

Asian markets remained under pressure, plunging (BBC) by as much as 10 percent in morning trading, with some stocks rebounding and others paring loses as the markets closed.

European markets showed gains in early trading, but then dropped rapidly (DeutscheWelle), with spread-betters expecting German, French, and British stocks to drop by as much as 5 percent today.

Trading of U.S. index futures (Reuters) hinted at a slight rise in Wall Street stocks when the market opens, as investors awaited a statement from the U.S. Federal Reserve.

Meanwhile, gold reached a record high (Bloomberg) of around $1,770 an ounce, as international investors sought a safe haven from increasingly volatile global equity markets.

Analysis:

With markets rattled by the downgrade of U.S. debt, some experts fear running out of policy tools to prevent another global recession, while others are calling on government and central banks to improve fiscal and monetary policy coordination, says this CFR Analysis Brief.

With luck, the U.S. downgrade will spur policymakers to act more responsibly and intelligently in confronting the country's long-term fiscal challenges, says this Financial Times editorial.

Policymakers do not have the capability--financial or political--to combat a second global recession, which has large implications for the world economy, writes TIME's Michael Schuman.

 

PACIFIC RIM

China Inflation Rises

Driven by volatile food prices, Chinese consumer inflation rose to 6.5 percent (FT) in July, limiting its policy responses to a worsening global economic situation.

Global food prices are being driven up by a number of factors including bad weather, low stocks, and unstable commodities markets. Combating price volatility and protecting food security will take increased agriculture production and better food distribution, explains this CFR Backgrounder.

NORTH KOREA: The United States requested talks with North Korea over how to search for the remains of U.S. soldiers killed there during the Korean War (Reuters), a week after officials from both nations met in New York for preliminary talks on dismantling North Korea's nuclear weapons program.

 

ELSEWHERE:

Police presence boosted in response to London riots

US pledges $105 million to humanitarian aid in Horn of Africa

This is an excerpt of the CFR.org Daily News Brief. The full version is available on CFR.org.