IT BEGAN innocently enough, with a market crash in China that might, at the outset at least, have been mistaken for the healthy clearing of froth from the world’s frothiest stockmarket. Yet the plunge that started in Asia (and which followed a nasty drop in American markets on Friday) has continued to gather momentum. It now looks very worrying indeed. When markets in Shanghai closed on Monday, stocks were down 8.5%—the Shanghai Composite’s worst single-day fall in eight years and, given the daily limits on how far individual stocks can fall, very nearly the biggest possible decline. The People’s Daily, the Communist party’s mouthpiece, declared the day “Black Monday”. The nervousness has radiated outward from China. The Nikkei index in Japan slipped by 4.6%. European bourses are down 4-5%. The Dow opened down more than 1,000 points; stocks have since regained some ground but the main indices are still down about 4%. The Eurofirst 300 index has had its worst day since 2009. Germany’s DAX has now lost all the gains it made in 2015.

The pain extends beyond stockmarkets. Emerging-market currencies from the South African rand to the Malaysian ringgit are tumbling. Commodities are also sinking. Oil has hit a six-and-a-half-year low. A broader index of 22 commodities compiled by Bloomberg is at its lowest since 1999. Only safe-haven assets such as government bonds issued by the likes of America and Germany are having good days. Even gold is down: investors who used it as collateral for buying shares and other assets are having to flog it to meet margin calls.

Two immediate questions arise: what has caused the jitters in markets, and how much should investors worry? The first is the easier to answer; the sea of red is down to China and the Fed. Start with China. The proximate cause for all this is a chain of events that began with the surprise devaluation of the yuan on August 11th. More than $5 trillion has been wiped off on global stock prices since then. Today’s Chinese-market meltdown seems to have been driven by disappointing data on Friday, which suggested that China’s industrial activity is slowing sharply, and by the failure of the Chinese government to unveil bold new market interventions today to prop up equity prices.

Read the article “The Causes and Consequences of China’s Market Crash” on economist.com.