Why investors focus on bad news from Europe
Prospects for the global economy are at risk if the euro zone refuses to follow US roadmap for recovery and slips into stagnation or recession
What's spooking the markets? One thing we can say for sure is that it is not the weaker-than-expected retail sales that triggered the mayhem on Wall Street on Wednesday morning. Most economic data in the United States has actually been quite strong in the month since Wall Street peaked on September 19.
So to find an economic rationale for the biggest stock decline since 2011, we have to consider two other explanations.
The first is the collapse of oil prices, which have dropped almost 30 per cent since late June in response to Saudi Arabia's apparent decision to wreck the economics of US shale oil.
Falling oil prices are generally beneficial for the world economy - and for most businesses outside the energy sector. But investors now fleeing from natural resource stocks will take time to recycle their money into other industries, such as airlines, retailers and carmakers.
Until this rotation happens, broad market indices are dragged down by the plunging oil shares, a process visible almost every day in the past two weeks, especially in the last hour of trading.
If falling oil prices were the main causes of the market setback, it would not be a big problem. There is, however, a far more worrying explanation: Europe - not just the obvious weakness of the European economy, but the inability or unwillingness of European Union policymakers to agree on a sensible response.