LONDON (MarketWatch) -- So, it wasn't the U.S. recession after all.
The huge losses in Europe on Monday -- which caused fright throughout the rest of the world -- probably were caused as much, if not more, by Societe Generale (FR:013080: news, chart, profile) unwinding what had been a big long position in Europe's top stock-market indexes than by any concern about the broader economy. See related story about SocGen's rogue trader.
In retrospect, the losses now make much more sense. For example, RWE (DE:703712: news, chart, profile) , a utility, lost roughly as much as Deutsche Bank (DE:514000: news, chart, profile) , the big bank, on Monday.
If the bet is that the world, and in particular the U.S. economy, is going to go off a cliff, then RWE won't suffer nearly as much as Deutsche Bank.
However, if the DAX is being sold as a whole -- as would have happened if a big index futures position was being sold -- then those two constituents are going to be bruised fairly equally.
That's not to say that the fears of a U.S. recession aren't valid. But the market's recovery from lows earlier this week hints that perhaps those concerns were overblown.
It also raises the disturbing question of whether the Federal Reserve was spooked into making an emergency rate cut on the back of what was just technical selling. The Fed by its own admission met Monday night - after the overseas selling was clear.
This rogue trader may have ending up pressing more buttons than even he imagined.
-- Steve Goldstein, London bureau chief End of Story
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