Need help replying to two students on a discussion.
This is the first student
1. How much did the Dow industrials fall on Wednesday? How many days in a row has the Dow fallen?
2. Why would a decline in U.S. retail sales and lackluster results from two of the nation's largest banks prompt investors and traders to sell stocks and move money into government bonds?
Because traders are temporarily losing their faith in banks due to the lack of loan production which is how banks make the majority of their profit. Traders are choosing the safer and more conservative route to turn up some profit.
3. The Wall Street Journal reports that yields on two-year government bonds issued by eight European nations and Japan were negative on Wednesday, indicating buyers' willingness to pay governments to hold their money. Why would anyone ever buy a bond that is guaranteed to lose money?
Buyers are figuring out that investing in stocks where they might lose money but have a better chance to gain more down the road is a better option than investing in stocks that might only make them some profit short term.
4. Why would copper be viewed as a bellwether for the global economy? Why did the price of copper fall after the World Bank cut its outlook for global growth in 2015 rather than before the announcement?
Copper is viewed as a bellwether for the global economy because it is still in high demand among countries. The price of copper fell because the demand for copper is not as high as it has been in the past. But compared to other goods, it is still considered in high demand
This is the second student
The Dow fell 186.59 points to 17,436. The Dow has been falling for the 4 days leading up to this large drop. The 3 day total before the large drop was 302 points. Government bonds are a safe investment with little risk, the decline in retail sales and results from the banks signal that the upper potential of the market is not as strong as desired. Individuals who have made money may wish to protect gains by putting them into the safer bonds.
There are reasons to invest in bonds that look like they are going to lose money. On the negative side, if thinks are too risky, banks may not be a safe place for money and a bond is a way of "losing less". With enough deflation, negative interest could still be positive monetary increase due to increasing purchase power. However, most likely it is viewed that the 8 European and Japanese bonds are purchased due to the speculation that the value of the Euro and Yen will increase in comparison to other currencies such as the US dollar.
Copper was looked at as the leader of the global economy due to the tendencies of copper movements to predict the market movements. In the simplest terms, copper is demanded for construction and construction is what tends to determine global markets.(Strong economies tend to have more growth and more construction.) It must be noted that in 2013 and 2014 the market went up while copper prices went down, a sign that copper may not be a great indicator.