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Economic
Trends
In addition to events
surrounding a specific industry or company, analysts
carefully watch what they call economic indicators -
general trends that signal changes in the economy. The
three major ones that influence the price of shares are
Gross Domestic Product, currencies and interest rates.
- Gross Domestic
Product
Gross Domestic Product (GDP) is the rate of economic
growth of the country as measured by the total
production of goods and services in our economy. When
the GDP is rising and the economy is growing, short-term
business prospects tend to improve.
Currencies
Another important factor is the demand for a countries
currency. Generally, when a countries economy is buoyant
we see a strengthening in a countries currency, which
inturn increases the price of exported items. However,
when a countries economy is contracting, business
activity is generally slows and we see a softening in
demand for a countries currency, which inturn reduces
the costs of exports.
Interest Rates
Interest rates measure the cost of money borrowed by
government, businesses and consumers. Rising interest
rates mean that it costs a company more to borrow and
run its business and this can lead to lower profits.
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