Economic news drives markets; it triggers adjustments in the prices of stocks, bonds, foreign exchange rates and other assets. It also prompts reassessments of economic expectations and prospects. A surprise on the positive side, such as a strong report on nonfarm payrolls or GDP advance release, tends to increase bond yields and exchange rates; a surprise on the negative side, such as a weak report on consumer confidence or manufacturing activity, generally lowers asset prices and raises inflation fears.
When reporting business stories, a good start is to focus on the two Cs: change and cause. Then circle back to the original number, such as a rise (or decline) in company profit for a particular quarter, but make sure that number is in context.
The standard approach for estimating the impact of economic news on asset prices relies on survey data to measure expectations. However, these surveys may be inaccurate or inconsistent, and the resulting estimates of asset price responses may have too little or too much variance. Rigobon and Sack have devel- oped a methodology that cleans these errors out of the estimated asset price responses. Their results show that the standard estimate of news impact agrees in sign with the Rigobon-Sack estimate, and they also indicate that the Rigobon-Sack estimates are typically larger than those produced by a standard approach.
Business news stories often rely on quotes from experts. These can be from neutral sources, such as industry, corporate or labor representatives, or they can be from public officials, citizens watchdog groups or academics. They should be brief and clearly written to help readers grasp the significance of the news.