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Fundamentals of    Business & Financial Journalism    Week 2: Covering financial markets    Jeffrey TimmermansMonday, 24 Se...
Using Twitter for news    ✤   Bloomberg Top Stories         ✤    @BloombergNow    ✤   Reuters Top Stories         ✤    @Re...
Reporting on markets: what you    need    ✤   Understanding of how markets work    ✤   Market data    ✤   Up-to-date news/...
Characteristics of markets    ✤   Bring together buyers (demand) & sellers (supply)    ✤   Anyone (usually) can participat...
Markets: Some numbers                            Prices                Turnover                                     Volume...
Markets: Some numbers                                       Prices are the most often cited                            Pri...
Markets: Some numbers                            Prices                   Turnover                                        ...
Markets: Some numbers                            Turnover is the monetary value                             of a day’s tra...
Markets: Some numbers                            Prices                           Turnover                                ...
Markets: Some numbers                            Prices                Turnover                                     Volume...
Markets: Some numbers                              Prices                          Turnover                               ...
Market prices    ✤   Prices in markets are news: they contain information         ✤    The sum of all market participants’...
Types of financial markets    ✤   Commodities    ✤   Stocks    ✤   Foreign Exchange (Forex)    ✤   Bonds    ✤   Derivative...
Methods of trading    ✤   “Open outcry” floor trading (NYSE)    ✤   “Over the counter” electronic trading (Nasdaq)    ✤   “...
Photos: Bloomberg (left), AP (right)Monday, 24 September, 12
Market participants    ✤   Retail investors (ordinary people)    ✤   Institutional investors         ✤    Insurance compan...
Types of participants                                 Investment                                            Information Le...
Why do they participate?    ✤   To gain access to capital (funds) for new or existing ventures    ✤   To put excess funds ...
Price formation in markets    ✤   People wanting to buy make a “bid” at a certain price for a certain        amount of an ...
Market data    Screenshot of a Reuters 3000 terminalMonday, 24 September, 12
Market data (free!)    Screenshot of Google Finance page (finance.google.com)Monday, 24 September, 12
Market comment sources    ✤   “Sell side”                                 ✤   “Buy side”         ✤    Traders             ...
Some key market players                              Paulson & Co.             Soros Fund             ManagementMonday, 24...
Problems with market sources    ✤   “Talking their book”    ✤   Unwilling to comment/too busy    ✤   Spread rumors    ✤   ...
Market comment: basic structure    ✤   Change    ✤   Cause    ✤   Expectations                           CCE CCF    ✤   Co...
U.S. Stocks Advance, Erasing Earlier Loss,         Following European Bank Rally         By Rita Nazareth - Sep 13, 2011  ...
Where to find...    ✤   Change: market data    ✤   Cause: world/local events, market sources    ✤   Expectations: news dat...
Finding “cause”    ✤   Any big economic news?    ✤   Any major local news?    ✤   What’s happening in other markets?    ✤ ...
Finding “context”    ✤   Biggest advance/decline since                                          ✤   Who’s making money and...
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Class2

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  1. 1. Fundamentals of Business & Financial Journalism Week 2: Covering financial markets Jeffrey TimmermansMonday, 24 September, 12
  2. 2. Using Twitter for news ✤ Bloomberg Top Stories ✤ @BloombergNow ✤ Reuters Top Stories ✤ @Reuters ✤ Wall Street Journal Top Stories ✤ @WSJMonday, 24 September, 12
  3. 3. Reporting on markets: what you need ✤ Understanding of how markets work ✤ Market data ✤ Up-to-date news/info on other markets/countries ✤ Market sources ✤ Ability to explain this stuff to readersMonday, 24 September, 12
  4. 4. Characteristics of markets ✤ Bring together buyers (demand) & sellers (supply) ✤ Anyone (usually) can participate ✤ Products traded are standardized and units of each product are interchangeable (fungible) ✤ Doesn’t matter who you trade with ✤ Trades are all (usually) processed by a central authority ✤ Information on all trades is publicMonday, 24 September, 12
  5. 5. Markets: Some numbers Prices Turnover Volume Index levels Bids OffersMonday, 24 September, 12
  6. 6. Markets: Some numbers Prices are the most often cited Prices Turnover numbers in markets. They can be prices of shares, bonds, futures, or the price of a currency as measured in another currency Volume Index levels Bids OffersMonday, 24 September, 12
  7. 7. Markets: Some numbers Prices Turnover Volume is the number of individual units of an asset Volume traded (usually in one day), for Index levels example units of shares or bonds Bids OffersMonday, 24 September, 12
  8. 8. Markets: Some numbers Turnover is the monetary value of a day’s trading in an asset; Prices basically just volume multiplied Turnover by the prevailing price Volume Index levels Bids OffersMonday, 24 September, 12
  9. 9. Markets: Some numbers Prices Turnover Volume Bids are the prices that would-be Index levels buyers are willing to pay for an Bids asset; these bids are shown to all market participants OffersMonday, 24 September, 12
  10. 10. Markets: Some numbers Prices Turnover Volume Index levels Bids Offers are the prices that would- be sellers are willing to accept for an asset they own; offers are Offers shown to all market participantsMonday, 24 September, 12
  11. 11. Markets: Some numbers Prices Turnover Volume Indexes measure the overall performance of individual assets Index levels on a market Bids OffersMonday, 24 September, 12
  12. 12. Market prices ✤ Prices in markets are news: they contain information ✤ The sum of all market participants’ – people’s – expectations of future performance of that asset ✤ BUT, just because an asset has a low price in real terms doesn’t mean it’s “cheap” or a bargain – or vice versa ✤ Berkshire Hathaway’s current price: US$134,584 per share ✤ PCCW Ltd.’s current price: HK$3.16 (40 US cents) per shareMonday, 24 September, 12
  13. 13. Types of financial markets ✤ Commodities ✤ Stocks ✤ Foreign Exchange (Forex) ✤ Bonds ✤ DerivativesMonday, 24 September, 12
  14. 14. Methods of trading ✤ “Open outcry” floor trading (NYSE) ✤ “Over the counter” electronic trading (Nasdaq) ✤ “Dark pool” private markets ✤ Bilateral trading (only two participants)Monday, 24 September, 12
  15. 15. Photos: Bloomberg (left), AP (right)Monday, 24 September, 12
  16. 16. Market participants ✤ Retail investors (ordinary people) ✤ Institutional investors ✤ Insurance companies, brokerages, hedge funds ✤ Corporations ✤ GovernmentsMonday, 24 September, 12
  17. 17. Types of participants Investment Information Leverage size Retail investors Small Public Small Institutional Public & Large Large investors Private Public & Governments Huge Unlimited PrivateMonday, 24 September, 12
  18. 18. Why do they participate? ✤ To gain access to capital (funds) for new or existing ventures ✤ To put excess funds to use and earn money ✤ To hedge (insure) against risks ✤ To speculate (bet)Monday, 24 September, 12
  19. 19. Price formation in markets ✤ People wanting to buy make a “bid” at a certain price for a certain amount of an asset ✤ Those wanting to sell announce an “offer” (or “ask”) price and amount ✤ People revise their bids or offers until they find a matching offer or bid ✤ All participants can see this informationMonday, 24 September, 12
  20. 20. Market data Screenshot of a Reuters 3000 terminalMonday, 24 September, 12
  21. 21. Market data (free!) Screenshot of Google Finance page (finance.google.com)Monday, 24 September, 12
  22. 22. Market comment sources ✤ “Sell side” ✤ “Buy side” ✤ Traders ✤ Mutual funds/ETFs ✤ Analysts ✤ Hedge funds ✤ Strategists ✤ Pension funds ...and don’t forget executives of public companies, lawyers, and ordinary investorsMonday, 24 September, 12
  23. 23. Some key market players Paulson & Co. Soros Fund ManagementMonday, 24 September, 12
  24. 24. Problems with market sources ✤ “Talking their book” ✤ Unwilling to comment/too busy ✤ Spread rumors ✤ Don’t really know what’s going on ✤ Use jargon ✤ Demand anonymityMonday, 24 September, 12
  25. 25. Market comment: basic structure ✤ Change ✤ Cause ✤ Expectations CCE CCF ✤ Comment ✤ Context ✤ FutureMonday, 24 September, 12
  26. 26. U.S. Stocks Advance, Erasing Earlier Loss, Following European Bank Rally By Rita Nazareth - Sep 13, 2011 U.S. stocks rose, sending the Standard & Poor’s 500 Index higher for a second day, as French banks eased concerns over their access to funding and investors watched for signs of progress in taming Change Europe’s debt crisis. All 10 main industries in the S&P 500 advanced as gains were led by industrial, raw material and Cause technology companies. The Dow Jones Transportation Average, a proxy for the U.S. economy, jumped 3.4 percent as airlines rose. Wells Fargo & Co. (WFC) and Fifth Third Bancorp (FITB) added more than 1 percent, following a rally in European lenders. Aetna Inc. (AET) jumped 5.4 percent as the health insurer said profit will probably beat its forecast. Expectations? The S&P 500 increased 0.9 percent to 1,172.87 at 4 p.m. in New York, after falling as much as 0.4 percent. The gauge has risen 1.6 percent in two days. The Dow Jones Industrial Average advanced 44.73 points, or 0.4 percent, to 11,105.85 today. “Stocks are trading on the news of the day and the news was moderately favorable,” Michael Cuggino, who oversees $15 billion at Permanent Portfolio Funds in San Francisco, said in a telephone interview. Comment “While the issues of liquidity and health of the European banking system and the long-term viability of the euro are still out there, today is a day where people are looking beyond that. We’ve had a big correction. Levels really haven’t gotten back to where they were.” The S&P 500 fell as much as 18 percent from a three-year high on April 29 through Aug. 8 on growing concern over Europe’s debt crisis and an economic slowdown. Since then, the index has risen 4.8 percent. Context The S&P 500 may drop below a one-year low reached last month because too few stocks have declined rapidly enough, according to MF Global Inc. FutureMonday, 24 September, 12
  27. 27. Where to find... ✤ Change: market data ✤ Cause: world/local events, market sources ✤ Expectations: news database, market sources ✤ Comment: market sources ✤ Context: market data, news database, professional experience ✤ Future: market sources, professional experienceMonday, 24 September, 12
  28. 28. Finding “cause” ✤ Any big economic news? ✤ Any major local news? ✤ What’s happening in other markets? ✤ Look for sector-wide moves, then individual share moves ✤ Don’t always believe traders’ explanationsMonday, 24 September, 12
  29. 29. Finding “context” ✤ Biggest advance/decline since ✤ Who’s making money and when? who’s losing money? ✤ How many days in a row up/ ✤ Is the event cited as a cause down? typical or atypical? ✤ How much have prices/yields ✤ Is today’s event the beginning changed in that time? or end of a trend? ✤ Highest/lowest level since ✤ What’s at stake? when? ✤ What happens next? Source: The Bloomberg Way: A Guide for Reporters & Editors, 10th EditionMonday, 24 September, 12

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