Equities, or shares, represent holdings of ownership of public limited companies. When shares are listed, they are available to be bought and sold on stock exchanges such as the London Stock Exchange (LSE) and New York Stock Exchange (NYSE). The New York Stock Exchange is currently the world's largest exchange, followed by the NASDAQ, London Stock Exchange, Tokyo Stock Exchange and then Euronext.

There are two ways in which investors seek to profit from equity markets; from expected dividend income paid by the company to its shareholders, and from an anticipated capital gain in the rise of the purchase price of the shares. Investors who are looking to trade CFDs or spread bet are more interested in whether a share is going to rise or fall in price. Spread betting allows you to participate in trading the world’s stock markets, but with many benefits over traditional share dealing.

Factors affecting equity markets

There are numerous factors which might be expected to affect the movements of equity markets including company-specific factors, interest rate decisions, inflation figures and market sentiment.

Company specific factors can include analyst upgrades, earnings updates, profit warnings or merger talks. These can drive a share price higher or lower depending on the news, so if you are trading equities, make sure you keep on top of the company specific news.

Interest Rate decisions are made by central banks such as the Bank of England, the US Federal Reserve or the European Central Bank. Interest rate decisions can have major impacts on currency pairs, or on company profits if borrowing costs become more expensive.

Inflation measures such as the Retail Prices Index (RPI) in the UK or Wholesale Price Index (WPI) in the US calculate the rise in prices over time. Interest rates will rise when inflation is on the rise in order to keep inflation under control. Inflation can have an impact on company profits and can as mentioned above, if interest rates increase they can impact equities, indices and forex pairs.

Market Sentiment is a phrase used to describe the general feeling in the market – whether it is overly bearish due to soverign debt issues or overly bullish after a positive jobs report, you need to keep a close eye on the general market sentiment. You might be looking to buy shares in Company A, but if the market sentiment is very negative at the moment it might be worth holding off to see if sentiment improves.