The US, Economic News, and the Global Financial Cycle

We provide evidence for a causal link between the US economy and the global financial cycle. Using a unique intraday dataset, we show that US macroeconomic news releases have large and significant effects on global risky asset prices. Stock price indexes of 27 countries, commodity prices, and the VIX all jump instantaneously upon news releases. The responses of stock indexes co-move across countries and are large -- often comparable in size to the response of the S&P 500. Further, these effects are persistent. US macroeconomic news explain up to 22% of the quarterly variation in foreign stock markets. The joint behavior of stock prices and long-term bond yields suggests that systematic monetary policy responses to news play a limited role for explaining the behavior of international stock markets. Instead, the evidence is consistent with a direct effect on investors' risk-taking capacity. Overall, our findings show that a byproduct of the United States' central position in the global financial system is that news about its business cycle have large effects on global financial conditions.