Why do shares fall with rising interest rates
When interest rates rise, the cost of borrowing increases, the people more reluctant to lend and makes new development projects. In addition, if interest rates rise to make people more for their money back if they arise in the bank because of higher interest rates. These two reasons together to influence stock prices in the following paragraphs I will explainexact process leading to change at this price after the interest rate moves.- Money rates
People are discouraged from risk their money in stocks
This combination can, pull people from the purse money to put it in banks. After all, if the bank is a 6 percent return on investment, whereas the stock market rate of return guarantee is not known why should the investor his money in stocks? What if the Bank at a 12% stakenot deposited money to encourage these investors to pull money in stocks, to put it in banks?- Money rates
The economy is slowing down
If the interest rate goes up, increases the cost of financing new projects and thus discourage the people to make new projects. This leads to a downturn in the economy through the slowdown in business activity, and since the whole economy is linked to begin existing companies, less profits due to theSlowdown.
This leads to sell to investors, the companies feared that they may make less profit in the coming quarter due to changes in interest rates. Now you could ask yourself the question: "If the effect of interest rate change was not noticeable, then why share prices move?" READ MORE http://www.moneyrates.equitylinesite.com/2009/10/02/why-do-stocks-go-down-when-interest-rates-rise/