How fast market reacts to news and economic events?

by Nisha Sharma Research Analyst

Whether it is a financial market or any other market, the flow of information plays a major role in driving market. When there is a macro-economic announcement or economic data release, the news spread all over the market and impact the intraday trading activity, market volatility, and share prices.

As an investor or trader, you must know how to handle your investments during such times. And in order to do this, you need to understand the link between the news flows and trading patterns.

Remember, when a piece of news hit the market, the thing that most affected by the economic events, and data is the trading activity. Also, it influenced most when the investor pays attention to the news. But, if investors aren’t aware of the news then the effect of the news, share prices, volatility, and volume appears to remain weak.

Many professional investors and traders have the habit to use the economic calendar on a regular basis to check for economic data release and their impacts on the market. When a large group of investors and traders do this the stock market strongly influenced by these macro-economic announcements, news, and economic events.

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Some news and events affect the individual stock prices and some news affects the movements in the whole market and indices. But, there is no guarantee that the nature of news will influence the market in a similar way.

At the time of economic data releases, the market could go anywhere. For instance, in the interest rate decisions in earlier this year, it was forecasted that the interest rate will rise. So, the investors and traders already positioned themselves as per the forecast. So, when the new interest rate announced instead of surging the market plunged.

However, after a few hours, it recovered.

Similarly, when a company releases its quarterly report of the year, the share price of that company tends to move as per the quarterly result. And when that happens, the traders take advantage of the announcement and buy or sell the stock for gains.

Sometimes, the degree of attention plays a major role in deciding the market reaction to the news or announcement. But, it is to the investor or trader’s action to the news available at his/her disposal.

Whatever the case, the news or economic events’ announcements play a major role in driving the stock prices, volatility, and market sentiment (bullish, bearish, or flat), etc.