Finance Assignment:Impact of US Political and Economic Event on Australian Share Price

Question

Task: Assume the role of financial analyst and write on this topic answering three quesions
Impact of US Political and Economic Event on Australian Share Price
Describes how/why a shift in the Australian share prices is triggered by information about political and economic events in the US,

Provide examples for different markets around the global to illustrate and support your explanations.
Presents an argument as to whether or not the Australian share market has information efficiency

With 10 Academic Reference

Some of the examples to support explanations are ( Note; These are just examples, should not include in report)
1. The Australian share market on Monday closed higher after regional markets lifted on jobs data positivity out of the US and Australian markets. In the same time in the US on Monday, the S&P 500 and the Dow Jones index fell as worries about the metal tariffs signed into law last week by President Donald Trump weighed on industrial stocks. See the pdf file 13 March 2018, Yahoo news.

2. Australian stocks are expected to open lower after US stocks fell amid uncertainty sparked by the sacking of Rex Tillerson as US secretary of state. See pdf file 14 March 2018, Yahoo news. 3. The Australian share market has lost ground for a third straight session, weighed down by falls by the banks and concerns about a trade war. Donald Trump considered fresh tariffs on goods from China, reviving anxiety of a global trade war. See pdf file 15 March 2018, Yahoo news.

4. The Australian share market is expected to open lower after US stocks suffered heavy falls during the offshore session, driven by losses in technology stocks. In the US, the major stock market indexes were down by more than one per cent, after Facebook led a sell-off in technology stocks on reports that the social media company's user information was misused. See pdf file 20 March 2018, Yahoo news.

5. Australian shares have opened comfortably higher after a strong surge in oil prices gave energy stocks and the major US stocks indexes a boost on Wednesday, with mining and energy stocks particularly strong. See pdf file 21 March 2018, Yahoo news.

Answer

1. Introduction
The share market is placing a very important role in the economy of any country. The stock market creates liquidity in the market. This report explains some of the political or economic events which affect the share market. This report analyzes the political and economic events in the United States, which affect the Australian share market. Further, discuss the changes in the price due to the factors and also understand the reasons behind this.

2. Impact of US political and economic event on the Australian share price
The stock market is volatile. The share prices are also affected due to political, economic, trade wars, natural disasters, etc. The stock market of Australia is also affected due to the political or economic events in the United States. Some of the situations and the impact their on the market are as follows-

3. The shift in the Australian share price based on the information about political and economic events in the US
Australian stock market is dependent on the United States to the extent. Australia and the United States have a trade relationship (Bratberg, Haugevik &Wold, 2015). Some of the other decisions also affected the Australian market, which may be political, economic, social, trade relations, etc. Australian stock market is also affected by world events. In 2015 terrorist attacks in Paris affected both the market of Australian and New Zealand stock markets. As already observed that when the United States takes a decision of restriction on travelling to Europe except for the United Kingdom (Sharif, Purohit &Pillai, 2015). This news affects the Australian share market also; the stock market reduces by 7 per cent, which is at 3 years low.

All other events in the United States, which may be related to political or economic also affected the Australian share market (Jens, 2017). When The United States releases the monthly bureau report, which reveals that un-employment increases, this market impact negatively and impacted also to the Australian share market.

Sometimes international trade relationship of the United States with the other country also affected the Australian share market, like China USA relation, which affects the Australian market also. So by all the above events, it can be said that Australian share price is based on the political or economic events in the United States.

4. Different examples in the world which affect the share market
The global share market is affected by political or economic events in the world several times. Some of the global events which affect the share market are as follows.

• Republican Donald Trump winning surprised the whole world,which implements the trump economy. Trump government restructuring the trade barriers, cut in personal and corporate taxes. These decisions impact market positively(Sornette,2017). These measure stock market S&P 500 and NASDAQ increases by 1%.
• Surgical strike on Pakistan by the Indian government surprised the whole country, and successfully task is completed. This strike impacts the market negatively (Tsai, 2017). By this strike market, Nifty fell by 2.1 per cent, and a lot of investors sell the security due to the selling pressure.
• The exit of Britain from the EU with 51.9% voting, which is a negative sign for the market. By this announcement domestic market goes down by 635 points.

These all above examples are explained that the market is affected due to the political or economic event in the world. It is also sometimes affected by global events.

5. The argument as to whether or not the Australian share market has information efficiency
Information efficiency is the moment by which the share market reflects the information. In this report, it is observed that the Australian market is affected due to theUnited States, which means the Australian stock market is information efficient. After analyzing it is observed that the United States bans travelling to European countries except for the United Kingdom, this news negatively impacts the Australian stock market (Sharif, Purohit & Pillai, 2015). The Australia market goes down by 7 per cent.

After further analyzing observed that the United States releases the monthly report, which explains the unemployment rate, and negative impact consumer price index due to poor retail sales. These events affect the United State Stock market (Baum, Kurov & Wolfe,2015) negatively. These events also affect the Australia share market. So by all the conditions, it can be saying that the Australia share market is an efficient information market and affected by the political and economic events of the United States.

6. References
Baum, C. F., Kurov, A., & Wolfe, M. H. (2015). What do Chinese macro announcements tell us about the world economy?. Journal of International Money and Finance, 59, 100-122.
Bratberg, Ø., Haugevik, K. M., & Wold, A. L. (2015). BPR No. 1, 2015| Views from Australia. Perspectives on the British-Australian relationship. British Politics Review http://hdl. handle. net/10852/68529. Jens, C. E. (2017). Political uncertainty and investment: Causal evidence from US gubernatorial elections. Journal of Financial Economics, 124(3), 563-579.

Mohanasundaram, T., & Karthikeyan, P. (2015). Cointegration and stock market interdependence: Evidence from South Africa, India and the USA. South African Journal of Economic and Management Sciences, 18(4), 475-485. Nelson, R. M. (2015). US sanctions on Russia: Economic implications. Washington, DC: Congressional Research Service. Rossi, M. (2015). The efficient market hypothesis and calendar anomalies: a literature review. International Journal of Managerial and Financial Accounting, 7(3-4), 285-296.

Sharif, T., Purohit, H., & Pillai, R. (2015). Analysis of factors affecting share prices: The case of Bahrain stock exchange. International Journal of Economics and Finance, 7(3), 207-216.

Sornette, D. (2017). Why stock markets crash: critical events in complex financial systems (Vol. 49). Princeton University Press.

Tsai, I. C. (2017). The source of global stock market risk: A viewpoint of economic policy uncertainty. Economic Modelling, 60, 122-131.