CBC Digital Archives

1987: 'Black Monday' hits world's stock markets

It was in 1929 that the volatile and powerful nature of the stock market first became clear. That year's market crash and ensuing decade-long depression revealed the vital, yet fragile nature of this system, and its tremendous power over world economies. The centre of that complex web has always lain in New York City, and what happens in the U.S. has usually had direct, and sometimes disastrous effects on Canadians. The CBC Digital Archives looks back on 50 years of coverage from 1958-2008, covering the crashes, "corrections," peaks and valleys of the stock market.

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Monday Oct. 19, 1987 began with a surprise rash of selling in Asia's stock markets. But by the time the closing bell sounded at the New York Stock Exchange the unthinkable had happened. Panicked stockholders had sold off millions of their shares causing some of the world's markets to lose more than $500 billion US in a matter of hours. This clip from CBC-TV's The National tracks the devastating events of Black Monday and looks at how it brought an end to the bull market of the 1980s.

Black Monday's effects were felt across the world, including Canada. The Toronto Composite 300 Index dropped a record 407.2 points, a daily loss of 11 per cent or a total of $37 billion. It would be nearly two years before the index would rebound to pre-crash levels.
• Black Monday, the largest one-day drop in stock market history, was prompted by a weak US dollar and a sudden spike in interest rates.

• The Dow Jones Industrial Average was the worst affected, dropping 508.32 points for an overall loss of 22.6 per cent (or $500 billion US). The previous one-day record was set in 1929, when the market dropped 100 points, or 13.5 per cent.

• In addition to the record losses in Canada, markets in Australia and Hong Kong dropped more than 40 per cent.

• Unlike the original Black Monday on Oct. 28 1929, none of the world's financial gurus foresaw the disastrous events of October 1987.

• 1929's "Monday" was preceded by "Black Thursday" and followed by "Black Tuesday" -which combined, led to the Stock Market Crash and the decade-long Great Depression.

• In the end of 1987, the American economy was in the midst of a five-year boom with most of the world's markets basking in the glow. No major news events had taken place and the US stock markets had hit an annual peak in August.

• In the weeks following the decline speculation about its cause was rampant, and included a well-traveled story about a crash in the New York Stock Exchange's primitive computerized trading system.

• Many economists now blame 1987's Black Monday on a variety of financial and psychological factors.

• Early forms of "program trading" are often cited for accelerating the decline. Such trading - which is commonplace in 2005 - involves traders who oversee computer programs which sell large batches of stock, often taking advantage of disparities in rising and falling markets.

• In 1987 such program trading blindly continued to sell off large amounts of stock, which contributed to the fall.

• Simple panic-selling from common shareholders also played a role. At some points during the day, so many people were trying to dump their shares that phone lines were jammed. Others were unable to sell since there were no buyers to be found.

• The day after the crash, markets around the world were put on restricted - or limited - trading status, in part to stop the decline and to allow employees to process the backlog of transactions.

• Pessimism ruled in the weeks following Black Monday, with many experts predicting a recession in the New Year. Thanks to a wave of companies who purchased their own undervalued stock back, markets began to climb back.

• The recovery was aided by an unexpectedly strong performance by the Nikkei Index in Japan, which helped boost markets around the world.

• The Dow, which was the worst hit, reached its pre-crash level by the summer of 1998.

• It would take longer for Canada's financial sector to similarly rebound. The TSE 300 topped 4,000 for the first time since the crisis, in August 1989.

• Coincidentally, on Oct. 19, 1981 - exactly six years before the market plunge - the Montreal Expos experienced their own Black Monday.

• The team was leading the fifth and deciding game in the National League championship series when Rick Monday, an outfielder with the Los Angeles Dodgers, hit a home run in the bottom of the ninth inning to win the series.

• Expos fans refer to the day as Black Monday, or "Blue Monday", in reference to the Dodger's infamous hit.

• It would be the closest the Expos ever came to playing in the World Series.

Medium: Television
Program: The National
Broadcast Date: Oct. 19, 1987
Guest(s): Ian McAvity
Host: Knowlton Nash
Reporter: Der Hoi-Yin
Duration: 3:21

Last updated: February 7, 2012

Page consulted on December 19, 2014

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