US Goes Limit Down

World economic numbers are out today, and they are nothing short of catastrophic.

The pound tumbled below $1.53 in its biggest drop in at least 37 years after a report showed the U.K. economy contracted more than forecast in the third quarter, bringing the nation to the brink of a recession.

The decline surpassed that of Black Wednesday in September 1992, when the U.K. was driven out of Europe's Exchange Rate Mechanism. Gross domestic product contracted 0.5 percent in the three months through September, the Office for National Statistics in London said today, more than the 0.2 percent forecast by analysts in a Bloomberg survey. The FTSE 100 index slumped as much as 9.1 percent and the yield on the U.K. 10-year gilt headed for its biggest weekly decline in a decade.

``This is once-in-a-lifetime stuff, we're all sat under our desks with tin hats on,'' said Neil Mellor, a currency strategist in London at Bank of New York Mellon Corp. ``The U.K. is in the first step toward a recession and the dollar's bid because of repatriation flows.''

Similar news in Japan and China earlier this morning has led to a disintegration of world markets today. Nikkei down 800 points, European markets are down 7-9% at this hour, and US stock futures have reached limit down numbers.

According to Reuters data, December S&P futures hit a low of 855.20, while Dow Jones futures touched a low of 8,224 -- the lowest levels at which both contracts could trade in a session.

"We are in a panic mode, I don't know how else to describe it and when you're in panic mode, all rational thought goes out of the window," said City Index chief market strategist Tom Hougaard. "We've just got to let this thing rage. I think we'll see the Dow below 8,000 today."

With global recession numbers showing that the UK, China, and Japan may actually be in worse shape the US right now, world markets have now thrown in the towel. LIBOR numbers are still high, having only fallen another miniscule less than 2 BP, and the overnight rate went UP 8.

This is going to be a horrendous day on Wall Street. Despite the global bailout efforts, the markets are once again in total freefall. Confidence is a casualty. This was the week where Wall Street tested the waters, and failed miserably. The Dow's been floating around 9,000 for the last couple of weeks, and Monday's close of around 9250 was a good sign that the worst might have been over.

I said then more pain was coming. Surprise! Folks, when Dow futures hit limit down 2 hours before the markets open, it's a disaster. I've been saying for six weeks now I fully expected the Dow to set a new Bush era low under 7,200.

We may very well be there next week. The next couple of days are vitally important. If we drop through the floor today under 8,000, then I honestly think we're heading for a complete meltdown.

What more can world governments do? The US, Japan, Canada, Australia, UK, and Eurozone took unprecedented action to prevent a meltdown just two weeks ago. That action has now failed. The wheels are off, folks. It's sinking in just how bad this is going to be...it's going to be brutal, and it's going to be global.

You will be hearing those two words often in the next several days, I will wager: limit down. We're approaching the point where trading circuit breakers will kick in and stop the markets, and it will happen if not today (we'd need to see an 869.1 point drop before 2 PM to hit the 10% circuit breaker for an hour time-out) then it will happen at some point soon.

After all, the lower the Dow gets, the lower the 10% circuit breaker level gets.