Global Stock Market

Report Outline
Stock World Goes High Tech
Big Three: New York, London, Tokyo
Moves Toward 24-Hour Market
Special Focus

Stock World Goes High Tech

On Monday, July 7, the Dow Jones index of 30 leading industrial stocks dropped 61.87 points, the biggest one-day plunge recorded on Wall Street in almost four years. The next morning, halfway around the globe, the Nikkei stock index fell sharply as trading opened in Japan on the Tokyo Stock Exchange. Hours later, at the start of the business day in London, the Financial Times industrial share index plunged by a record 30.1 points.

While all three of the world's biggest stock exchanges later recovered, July's events underscored the growing interdependence among the world's financial centers. A temporary downturn in one market has an immediate effect on the others, as investors shift huge sums of money among a growing number of financial instruments available in many different markets. And while these markets have long affected one another, high technology is enabling them to do so at a much faster pace. As they have in manufacturing industries, computers are revolutionizing the financial industry, making it not only more efficient but challenging established ways of doing business.

As international trade has expanded since World War II, the industrialized nations' exporting companies have carved out markets for their goods overseas. Increasingly, they are looking outward to meet their financing needs as well. In an effort to reduce their dependence on a single market, corporations are raising capital in overseas markets by selling stock—partial ownership in a company—or issuing bonds, which are loans, to foreign investors. At the same time, the industrial world's consumers, who have come to know more foreign companies through their products, are more willing than ever to invest in these companies' securities. The managers of large institutional funds—insurance companies, pension plans and mutual funds—are looking overseas for opportunities to diversify their holdings among different countries.