January 22, 2008 / 4:15 PM / 12 years ago

FACTBOX: Impact of the biggest stock falls in history

(Reuters) - Tumbling stock markets and fears of a recession led the Federal Reserve on Tuesday to make a surprise 75 basis point interest rate cut.

Many investors had anticipated a sharp correction as banks around the world have announced billions of dollars of losses linked to their exposure to defaulting U.S. subprime mortgages.

Following is a glimpse into the impact of some of the biggest stock market falls in history:

* 1929:

— An unprecedented stock boom in the United States in the summer of 1929 was followed by one of the biggest crashes in history. The crash, which started in October 1929, heralded the beginning of the “Great Depression” of the 1930s.

— On September 3, 1929, Dow Industrials hit a record peak of 381, a level it would not touch again for over two decades. The Dow eventually plunged 48 percent in just 10 weeks.

* The response:

— The Fed had limited powers 80 years ago and it was overwhelmed by the Depression. In the 1930s, policies followed by then U.S. President Franklin D. Roosevelt helped his country emerge from worldwide economic depression.

* 1987

— News of an August U.S. trade deficit of $15.68 billion triggered a record fall on Wall Street. On October 16, the Dow took the first 100-point dive in its history as a record 338 million shares were unloaded in New York. The Dow ended down 4.6 percent, or 108.36 points.

— On October 19, stock markets crashed in Asia and Europe, rattled by the fall in New York. Subsequently Wall Street dived 508.32 points, taking the Dow down to 1,738.4. The crash wiped 22.6 percent off the value of the NYSE, compared with 12.8 percent on the worst day of the 1929 Wall Street Crash.

* The response:

— On October 21, President Reagan signaled his readiness to consider tax increases as a way to cut the U.S. budget deficit.

— The Fed reassured Wall Street it was there to keep the flow of cash going and in 1988 cut interest rates. Both moves helped to send stocks into a recovery.

* 1997:

— In July-August 1997, currency markets in Asia came under pressure from speculators as the market lost confidence in the so-called “Tiger economies”. Thailand, Indonesia, the Philippines and Malaysia were the most seriously affected. On October 27 the Dow Jones industrial average plunged 7.18 percent. Stock markets across the world suffered.

* The response:

— ASEAN plus China, Japan, and South Korea (ASEAN+3) started promoting ties to help avoid a repeat of the financial crisis.

— China took radical measures to overhaul its banks and wipe billions of dollars of bad debt off their books.

— Indonesia, which was among the hardest hit in southeast Asia as investors fled the region, was given a $43 billion rescue package by the IMF.

— South Korea said in 2002 it had spent 156 trillion won ($129 billion) in public money to fund reforms since the crisis.

* 2007:

— On February 27, 2007, the Dow index fell 3.3 percent, or 416 points. The crash was mainly precipitated by the biggest one-day fall in a decade in China’s benchmark stock index which wiped out about $140 billion of market capitalization. The Nikkei share average lost more than three percent and the FTSE 100 was down 116.1 points, or 1.85 percent.

* The response:

— Scrambling for safer places to put their money, investors ran from risky and volatile markets in stocks, junk bonds, and emerging markets, and poured money into the safe haven of Treasury bonds and cash.

Writing by Jijo Jacob, editing by Paul Bolding

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