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Financial markets

Securities sectors of
The term the
'securities' market, or
refers to may 'track'
stocks, (= exactly
bonds and follow) a
money particular
market index.
instrument Each fund
s. These will have
are an
explained investmen
in turn t
below. objective,
normally
Individual either
investors regular
and income
financial (from
institutions share
can buy dividends)
stocks (= , or long-
equities) of term
companies capital
listed on a growth
stock (from an
exchange. increase in
The term the share
'shares' price), or a
includes balance
both between
stocks and the two.
privately
held stakes Stocks are
in small bought
firms that and sold
are not on a stock
publicly exchange
traded. A (= bourse).
'basket' of Sometime
stocks can s this is a
be picked physical
by a fund location,
manager like the
and put New York
together Stock
into a Exchange
mutual on Wall
fund (UK: Street.
unit trust). Other
Funds may times
invest in there is no
particular location:
countries, the
or different NASDAQ is
an perform
electronic ance.
exchange. • Analysis
A small of the
selected national
group of and global
stocks can economy.
be brought • Te
together to chnical
make an analysis:
index. For using
example, charts
the Dow and
Jones internal
publishing market
organizatio statistic
n compiles s (eg
'the Dow' volume
(an index and
of 30 large momen
companies tum) to
), and identify
Standard future
and Poor's trends
- a credit and
ratings turning
agency - points.
compiles The bond
dozens of market is
different about ten
indices times
based on bigger
company than the
size or stock
market market. If
sector. a
Why do governme
stocks go nt or large
up and company
down in wants to
price? borrow a
When is a large sum
stock of money,
worth it issues a
buying? bond and
Financial receives
analysts do the money
research as a loan
on this, from the
using three institution
main tools: or
• An individual
alysis of who buys
individu it (= the
al bondholde
compani r). The
es: their original
market amount (=
position the
and principal)
is then
paid back called
over a 'investmen
fixed t grade',
period of while
time (= the high-risk
maturity/t bonds (the
he term of company
the loan). might go
And of bankrupt
course the or default
bondholde on its
r also repayment
receives s) are
interest (= called
the 'high-yield
coupon). bonds' or
The bond 'junk
market is bonds'.
entirely Bonds can
electronic be traded
and does on the
not have open
any market -
physical they don't
exchanges. have to be
US held by
governmen the
t bonds original
include the buyer until
30 year T- maturity.
bond (= In
treasury particular,
bond) and their price
the 10 year goes up
T-note, and down
while over the
European term of
governmen the loan
t bonds according
include the to:
German • In
bund. flation
These are (the
all interest
considered repaid
to be low- on a
risk. bond is
Corporate fixed
bonds over its
have two term, so
grades, rising
depending inflation
on the risk, will
ie the reduce
credit the
rating of bond's
the final
company. value).
Safer • Cu
corporate rrency
bonds are movem
ents market is
(bonds bigger
are than all
issued the
and securities
then markets
repaid in combined
one (around
particula $2 trillion
r a day).
currency Here,
- their dealers
value buy and
changes sell
as that currency
currency pairs such
fluctuate as
s). EUR/USD
A third (= euro
type of against
market, the
used by dollar).
investors Players
with spare include:
cash • Co
available mmerci
for a short al banks
time (represe
period only nting
(under a both
year), is themsel
called the ves and
money client
market. compan
Investors ies).
can buy T- • Ce
bills from ntral
the US banks
governmen (represe
t, nting
'certificate govern
s of ments
deposit' trying
from a to
bank, or maintai
'commerci n
al paper' stability
from a of their
company. own
These are currenc
all short- y).
term loans • Pension
that pay funds, etc.
interest. There is a
huge
Other amount of
markets speculatio
The foreign n in this
exchange market. If
(= forex / a currency
currency) fluctuates
in value, dealers
there are trade the
all sorts of future
implication price of
s for: such
buying or things as:
selling • Energy:
foreign crude oil,
equities natural
and bonds; gas, etc.
internation • Metals:
al trade; gold,
inflation silver,
(because copper,
of steel, etc.
payments • So
for f
imported commo
goods), dities:
etc. A lot coffee,
of dealing sugar,
is done to grains
protect (eg
against (= corn,
hedge) wheat,
such risks. soybean
Finally, s),
there are livestoc
the k (eg
commodity cattle,
markets. hogs),
Here, etc.