Stock markets plunge as investors panic

Global finacial markets are in turmoil. The Dow was down more than 212 points at its lows; closed at 13,239.54 on Friday.

We are all affected by stock market falls even if we have never owned a share or investment fund. The disruption affects us through our employers, our pension funds' holdings of financial assets or our mortgages.

The world's central banks have now injected $326bn on Thursday and Friday into the money markets to fend off the threat of a credit crunch, where the availability of loans dries up and interest rates soar.

Investors continue to worry that that the U.S. subprime loan problem might be turning into a full-fledged global financial panic.

The subprime woes, related to the fallout from losses on US mortgages for people with poor credit records, again took centre stage in US markets on Tuesday while related losses at Australia's top investment bank shows that the impact has global implications.

A few years back, most people in the world's financial markets believed in the old adage that when the US sneezed the rest of the world caught a cold. This no lnger holds true.

While the US economy may have softened, the rest of the world has stormed ahead, led chiefly by the emerging economies. For those countries with weak domestic consumer spending - apart from Japan, Germany is the other obvious example - the strength of emerging market demand has provided a welcome economic shot in the arm through higher exports.

The US is Japan's most important export destination. The Japanese worry about the implications of the US housing slowdown and the fallout from the sub-prime market.