8/10/2011
In Commerce we have learnt that because of the many foreign investments in Australia we are highly affected by overseas financial news. In this case the ASX had jumped $90 billion in 3 days as Australian investors were more confident over the European debt crisis- the European Central Bank decided to keep interest rates steady despite fears of recessions in countries using the Euro, and as a result had decided to construct re-financing operations. The renewed confidence means that investors, governments and consumers are more ready to invest amd buy products in companies which pushes the share price up, indicating more confidence which drives this cycle.
Because of this renewed confidence shares in the US went up, as did Australia's, recovering from the recent downturn in share prices. This follows the pattern of the business cycle in the short team- shares fall but usually they expand again over time.
However this pattern is not to continue for long due to the general uncertainty in Europe over their debt crisis and the natural cycle of the business cycle- the economy (and other economies) will eventually slow down and contract.
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