The Iron Link Of U.S. To World Markets
Who is following who in the wild roller coaster ride otherwise known as the world financial markets in recent days?
European and U.S. stock markets are moving up and down in absolute lockstep with each other. They are so closely matched in their up and down fluctuations that it cannot be by chance. Investors are probably dabbling in all the world’s markets and linking them via computerized buying and selling.
World Financial Markets at a Glance
The Financial Times of London has arguably the most comprehensive coverage of world financial news in the world.
Within it is this drab titled data page that contains near real time stock market quotes for markets around the world:
“Markets Data Home“-Financial Times, London
It is a great place to see, at a glance, what is happening in the major stock markets all over the world. It is a treasure trove of information.
World markets are active 24/7. The global markets open and close at different times with overlaps. The FT lists all that information in graphic and numeric form.
It displays market activity graphically over the last 24 hours. For each individual market it lists its latest quote, activity since the last close, percentage change, a comparison to its 52 week high/low and how long until that particular market closes.
The default display is a global view of the major markets but has tabs to click where you can see regional market activity in Asia-Pacific, Europe & Africa and the Americas.
Global Markets Today – 8/19/2011
As you can see in the graphic above that in the last 24 hours Asian markets opened sharply lower. That can be attributed to the huge 420 point drop in the DOW yesterday.
However, both the Nekkei and Hang Seng fell even further late in their trading day. Upon their later opening the European markets quickly fell to the Asian levels and stayed there until late in their trading day when they made a comeback.
When the DOW and S&P 500 later opened for their trading day they both quickly fell to meet the European markets then did an immediate about face to match the upward trending in European trading late in the European trading day.
After that the American and European markets then matched, spike for spike, the up and down fluctuations with each other. First they climbed, then they fell off at the close of the European markets.
Monkey see… monkey do!
The daily cycle of market fluctuations is clearly driven by emotional factors. What happens in a day matters not over the long haul.
So what is driving the general downward spiral in the markets?
There is an insightful analysis explaining current world economic trends in the FT by macroeconomist Gavyn Davies:
“What went wrong with the global recovery?“-Financial Times, Gavyn Davies, 8/18/2011
This article quantifies the effects of the Japanese earthquake, global oil supplies and general government fiscal policies on world GDPs and consequently on world markets. Davies then connects the dots to weakened world wide consumption and lack of demand.
Davies concludes saying that because of the political mood in both Europe and America that a global weakening in demand could be a “surprisingly difficult problem to solve”.
World financial markets are intimately interconnected. During uncertain times how one region goes, so go the others. That is probably because big investors are playing all the markets and link their trading via computer. That is why they spike up and down together.
That is a big leap to make looking at just one day’s data in the Financial Times. It seems reasonable it is true most of but not all of the time.
Gavyn Davies points out concrete reasons for the current status of world markets and traces it to a hangover left over from the 2008 global recession – a lack of global demand for goods and services.
How can the downward spiral be overcome to bring the world back to economic prosperity?
Somehow, its seems unlikely that a jobs plan cobbled together during one man’s luxury vacation will get it done.
Posted on Aug 19, 2011, in DOW, Economy, euro, euro zone, Europe, European Union, Financial Times, GDP, Global Stock Markets, Gross Domestic Product, Politics, Stock Market, World Economy. Bookmark the permalink. 2 Comments.