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It was a horrible day for stock investors around the world. The single worst day for losses in many places since 9/11. In Asia, Europe, Latin America and Canada, almost all major stock indices were down by a significant amount. U.S. exchanges weren't open because of Martin Luther King Jr. Day, but around the world, the main topic was the U.S. economy. Investors everywhere spoke of a fear that the U.S. is heading for a much deeper recession than previously thought; a recession that may hurt economies around the world.

NPR's global business correspondent, Adam Davidson, has been keeping tabs on this.

And Adam, why did we see such an acute dip today? We've been hearing talks about a recession for months now.

ADAM DAVIDSON: Yeah, it's true. The phrase of the day is, the markets are trading on sentiment. And that is a fancy way of saying that people are scared. They are scared of what is happening to the global economy and they're scared of what other people think is happening to the global economy. They're not necessarily selling off stock because of specific analysis of data. They're selling off stock out of panic, out of fear. Now, there was bad data last week. There was a lot of bad data. Housing market in the U.S. continues to get worst.

President Bush acknowledged that the economic problems are more severe than he had previously. Also, President Bush and some of the leading Democrats presented their suggested solutions to get us out of this potential recession. And I think it's safe to say that markets around the world were particularly unimpressed by any of those proposals.

BLOCK: And how unimpressed were they? How big were these losses today?

DAVIDSON: I mean, the numbers are pretty big. In England alone, hundreds of billions - or over a hundred billion, let me say, was lost. France lost a huge amount. Its stock market is down something like 15 percent over the last few weeks. Similarly sized losses in Japan. And India had - I think its largest loss ever in a single day on its stock market. Now, this is a one-day event. And all the usual cautions apply that, you know, these are paper losses so far for most people and most people who are investing for the long term. The markets usually bounce back. But we are talking about hundreds of billions of dollars, maybe over a trillion or two dollars lost in one day of trading.

BLOCK: You were talking before about the impact of fear and how that ripples through these stock industries around the world. Why does bad economic news in the U.S. lead to so much fear in Asia, and Europe, and these other markets?

DAVIDSON: This is kind of a surprise. I mean, it wouldn't have been a surprise a year ago or five years ago. The U.S. has been the center of the global economy. And U.S. consumers buying stuff is what fuels - the factories and other economic activity in China, and Europe, and Japan, and around the world. But a lot of people have been talking about 2008 as the year of what is called decoupling, that this would be the year that the U.S. would shrink in importance, that Asia, and Europe, and Latin America, and the Middle East would sort of create their own financial energy.

And if the U.S. were to lose economic steam, those other places could carry on without us. Today suggests that the decoupling is not happening as dramatically as people had expected, that investors in every corner of the world see the U.S. economic slowdown as crucial to their financial success. Again, it's one day. We'll see at the end of 2008 if people are talking about this having been the year of decoupling. But right now, today, the evidence of today suggests that the world still really depends on U.S. demand for their goods in order for them to do well.

BLOCK: So, that buffer that people thought might be there didn't appear today, at least?

DAVIDSON: At least today, right. I mean, these things happen slowly over time, so we'll see.

BLOCK: Mm-hmm. Adam, it does seem like there is a lot more bad financial news coming all the time - housing prices falling, unemployment rising, fears of inflation. Where do economists say we are in this cycle? Is there any consensus on that?

DAVIDSON: The growing consensus is that either the U.S. will go into recession or it will have a dramatic slowdown that sort of feels like a recession. I think, to the average person, the statistical or data difference really doesn't matter that much. The argument now is how long will that slowdown or recession be. Some say three to six months, some say longer and more painful.

BLOCK: Of course, all of this is coming in the middle of the presidential primaries. And it's starting to have an impact to certainly on what the candidates are saying right now.

DAVIDSON: Yeah, this is really becoming the economic presidential race. It's not the Iraq presidential race we were all predicting six months ago. And I think this is all good news, in a sort of cynical way, for Democrats because when the economy takes a downturn, the party in power usually loses.

BLOCK: Okay. NPR's Adam Davidson, thanks so much.

DAVIDSON: Thank you.

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