Yesterday, we looked at the relationship between stock markets and currencies. Today, we’re going to take a look at the most important stock indices for forex traders to watch.
Dow Jones Industrial Average (US)
This is one of the top stock indices in the US, measuring the performance of the top 30 listed companies on the New York Stock Exchange. The name is a little misleading, as very few of the companies in the index are involved in industrial production – it is more of an all-purpose stock index. This is one of the most keenly watched indicators by investors in markets around the world, as it is quite an accurate barometer of market sentiment. Some of the big names listed include McDonalds, Intel, and Pfizer.
The Standard & Poor 500 (or S&P 500) is a weighted index of the stock prices of the 500 companies in the US. Being highly representative of the state of the US economy as a whole, it is widely used as an indicator for macroeconomic trends. It is the second-most traded index in the US, after the Dow, and many funds (including pensions) are set up to mirror the performance of this index.
The National Association of Securities Dealers Automated Quotations (NASDAQ) is the biggest electronic securities trading market in the US with around 3,700 companies listed. It also has the largest trading volume of any stock market in the world, and is favoured by companies in the technology sector, including Facebook and Apple.
The Nikkei is the equivalent of the Dow Jones Industrial Average for the Japanese stock market. It consists of a price-weighted average of the top 225 companies in Japan, and is considered to be representative of the market as a whole. Listed firms include Fuji Film, Japan Airlines, and Toyota.
The Deutscher Aktien Index (DAX) is the top stock market index for Germany, consisting of the top 30 blue chip companies on the Frankfurt Stock Exchange. Given Germany’s status as Europe’s strongest economy, and a pivotal figure in the Eurozone, this is the most watched index by EUR traders. Listed companies include Deutsche Bank, BMW, and Adidas.
DJ EURO STOXX 50
The Dow Jones Euro Stoxx 50 index is the top blue-chip index for the entire Eurozone. It consists of 50 leading stocks from 12 countries in the Eurozone, and was created as a joint venture between Deutsche Boerse AG, Dow Jones & Company, and SIX Swiss Exchange.
The FTSE tracks the stock prices of the biggest firms on the London Stock Exchange in terms of market capitalization. The LSE produces a few different versions of this index, but the FTSE 100 is the most commonly quoted.
Hong Kong has long been a major financial centre, and the rise of China as a financial superpower has led to an increase in attention among traders to its leading index, the Hang Seng. This is a representative index of the biggest firms listed on the Hong Kong Stock Exchange.
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