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Recently the USA stockmarkets fell which led the UK markets to fall also. According to the news the fall in the USA was due to mortgages and loans not being pain back on time by the borrowers. How does this therefore affect the markets in the UK and the world?

Thanks x

2007-08-26 11:04:03 · 7 answers · asked by Anonymous in Business & Finance Investing

7 answers

Out sourcing

2007-09-03 11:09:21 · answer #1 · answered by Anonymous · 0 0

Stock markets rise and fall depending upon the supply and demand for shares. The US stock market does not affect the rest of the world, it's the investors that cause the effect. You see, if there is some bad financial news from the USA investors worry about a spin off effect so they panic and sell lots of shares. That's what causes the effect, investors selling shares. If they did not sell shares then prices would stay high because the supply would be low.

Of course it's a lot more complex, but in short it is only the investors/share holders who cause changes on stock markets.

2007-08-26 11:17:54 · answer #2 · answered by Anonymous · 0 0

Investment is International, The USD $ is the world reserve currency, they have been the world leader since the end of WW2, their market/economy is so big etc etc.
This still does not fully explain why their effect is so pronounced on the rest of the world.
I suggest reading: "The Creature from Jekyll Island" by G. Edward Griffin. ISBN 0-912986-39-5 for an in depth answer to your question.

2007-08-27 20:31:54 · answer #3 · answered by elray 1 · 0 0

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2015-01-27 12:09:22 · answer #4 · answered by Anonymous · 0 0

Mortgages are packaged and resold. Financials all over the world held US mortgages in their portfolios. When the value of those mortgages dropped the equity of those companies fell the same as it did in the US. The cause originated here, but the effect was felt all over. When the selling started panic set in just like it did here.

2007-08-26 11:38:09 · answer #5 · answered by Mystery 6 · 0 0

Nearly everything is global and interconnected now...especially in "big business" and "big finance" matters.

The USA is clearly recognized as the largest "consumer economy"...for many reasons...the ability to own your own home/land etc...being one of them. This "buying of your home" is typically NOT done with 100% cash. The funds for buying your loan is "borrowed money" from "some magical place" that most people don't think about much. What it is "in the big picture" is OPM...Other People's Money.

When we, the financial community, provide $ for your home loan....you put $50,000...the "bank/lender" pays the seller the other "$450,000" on your behalf!!! Yes, actually pays it out. That money in turn is borrowed from somewhere else...wall street with "packaged" loans underwritten by CMO/CDO investors, the federal government within FHA guidelines, banks and other institutions that make a % off of the % rate of the loan. Many of these...get there money from the US Treasury. Where does the "Treasury" get its money.....among other places...from foreign investors. That is where the commentary about China, Russia, etc investing so much money in America becomes linked. While the USA has lower risk of loss than many other weaker economies and our Treasury rates are relatively competitive...countries and major institutions will "park" money here.

When the "parked money" is no longer as safe a risk as it was before...because of defauting loans trickling down through the financial system of America...then foreign investors may pull out some of their funding by not re-investing into our Treasury notes, etc. Therefore...less money available to lend...less liquidity as they say in the news now.

If there is less money to lend...because of higher risks...and rates aren't high enough to compensate for that risk...then we essentially end up with a "lock down" on the banking/financial system of America. People/companies can't get loans because the "source of the funds" is drying up/gone...things don't get bought or refinanced...business stops getting done...less earnings...lower P/E ratios on wall street...a stock market drop....and... all of this on top of the "international investors" losing enough of a portion of their investments to make other economies a better risk/reward proposition.

2007-09-02 16:45:05 · answer #6 · answered by Anonymous · 0 0

Good question, and this should start you on the track to understanding exactly how the world 'works' ..

I suggest you consider taking a Finance course at Uni (or Evening classes).

2007-08-27 05:05:14 · answer #7 · answered by Steve B 7 · 0 0

Because the US economy is so big.

2007-08-26 12:37:31 · answer #8 · answered by jdkilp 7 · 0 1

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