Why did the global markets fall today?

Sensex down 3.8%, Shanghai down 2.6%, Russia down 1.5%, Brazil down 0.66% (on friday), Taiwan, Hang Seng, Straits Times, Kospi down over 3% each.
This sudden fall in global markets is because of the disappointing inflation data in the United States. The Producer Price Index (PPI) released on Thursday set the alarming tone. November PPI was up 3.2% vs a consensus estimate of 1.6%. When contrasted with 0.1% in Oct and 1.1% in Sep, November data is really of a concern. By the way, this was the most since 1973. Come Friday, the Consumer Price Index (CPI) brought about the mayhem. November CPI came at 0.8% vs an estimate of 0.6%. This is huge when compared to 0.3% for Sep & Oct months and this figure is the most in two years. What does increased CPI & PPI mean for US? This implies that the inflation is going up which will halt the fed from further rate cuts. If this happens, where will the stimulation to the economy come from at the back of weak credit markets and battered housing markets?

Weakness in housing markets will weaken the demand for resources like metals, oil and services. Moreover, the sentiment is turning negative due to two other reasons. Firstly, Bear Sterns and Morgan Stanley will come out with further write downs when they declare results this weak. Goldman Sachs is expected to do well. Secondly, there is further tightening expected in China. Remember, China has increased CRR rate only last week. The increase in interest rates is expected to be in December or January as the inflation touches the highest in 10 years. Though the economy has been growing at 11% in last two quarters, there are concerns that the demand for resources may soften due to monetary tightening.

More data flow is expected from US through housing numbers and the speculation on whether fed would cut interest rates in the light of Stagflation is to be seen. Till then the US markets along with the US dependent markets will be shaky.