Because the economies of one country affect the economy of another thru' exchange rates, interest rates, and import and exports. If Europe looks like it's going into recession, then the market for American exports to Europe would be reduced in size. If the Euro decline in value, then the American exports would be more expensive in Euros but European exports would be cheaper in the US. If Britain raises it's interest rates thru' its central bank then investors might want to take US dollars and buy British bonds - reducing the interest in US debt instruments. There cannot be a large "gap" between the interest rates of the major trading nations/blocs. If there's a large gap, then "Hot money" moves to the bloc paying the higher interest rate - thus causing the value of that currency to rise which can be very bad for its industries.
In a nutshell, all this information is broadcast around the world so local stockmarkets can respond to these international changes and not just to local (national) events.
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There are practically two reasons
1. Arbitrage and 2. Ripple Effect
many markets have the same companies included
What's the link and cause ?
