LUXEMBOURG CITY, LUXEMBOURG / ACCESSWIRE / November 30, 2017 / Many factors move stock markets, but the strength of a country's currency can have a surprisingly large bearing, as several high profile events -- most notably Brexit and the U.S. election -- have underlined this past year. To help explain the effects currency movements can have, the expert traders at Q Smart Limited discussed three recent examples in the United States, the U.K. and in Asia.
After an initial wobble due to the recent Presidential election, U.S. stocks rallied as the country's benchmark share index, the S&P 500, rose more than 10 percent to new all-time highs in December 2016. While there were many factors involved, the strength of the U.S. dollar, which gained 3% during the same period, was the key driver. Increased domestic spending by businesses and consumers, accompanied by huge infrastructure spending plans, raised inflation expectations and the prospect of interest rate rises. In turn, the dollar became more attractive to investors. With more than 70 percent of the revenues generated by American companies listed on the S&P coming from the U.S., a strong dollar supports the earnings of these businesses and improves their share prices. In contrast, 71 percent of the listings on the London Stock Exchange's FTSE 100 generate their revenues from outside the U.K. So when the Brexit decision sent sterling tumbling downward, the index rose sharply. In the three months following the vote, the pound fell 12.8 percent against the dollar while the FTSE rose 10.4 percent. Q Smart Limited explained that, essentially, since the majority of companies receive their payments in foreign currency, they become worth much more when converted back into pounds if sterling is low. The strength of sterling against the euro is also important, given the large chunks of revenue accounted for by France, Germany, Italy and other Eurozone countries.
In Japan, earnings from Nikkei 225 companies are more finely balanced -- 53.2 percent of profits come from within the country -- and therefore currency movements tend not to have such a strong effect on the stock market. The yen rose dramatically from November to December 2016, but the Nikkei remained constant throughout. Currency move are by no means the main reason why stock markets rise and fall, but they can be important depending on which regions listed companies are exposed to and should always be considered when building a diverse portfolio.
Q Smart Limited is a leading supplier of Contracts for Differences (CFDs) and offers unparalleled trading conditions for stocks, commodities, and indexes. Created through the joint effort of financial professionals and experts in online commerce, Q Smart Limited is based on the principle of training people to invest and operate with confidence in an innovative and safe environment while being backed by the best-personalized service on the market. With more than 17 years of experience, Q Smart is one of the original pioneers of trading.
Q Smart Limited - Market Leading Supplier of CFDs: http://qsmartlimitednews.com
Q Smart Limited - Discusses Brexit's Global Market Impact: https://finance.yahoo.com/news/q-smart-limited-discusses-brexits-002100324.html
Q Smart Limited - on the Investing Trends Expanding in 2017: https://finance.yahoo.com/news/q-smart-limited-investing-trends-155200356.html
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SOURCE: Q Smart Limited
