The leading German index, the Dax, has lost around 20 percent in value over the past twelve months.
(Photo: picture alliance/dpa)
As we all know, everything is connected in the financial markets – and that’s pretty bad news for investors around the world these days. The causal relationships are complex, none of which is positive at the moment, neither for bonds nor for shares.
For example, the dollar has appreciated significantly against almost all major currencies over the past few weeks. In Japan, this has increased the pressure on the government and central bank to cushion the fall of the yen with interventions in the foreign exchange market. In order to get the necessary dollars, Japan will probably have to sell US government bonds, at least that is what the markets fear.
That fear was a factor in the surge in yields on 10-year US government bonds to over 4%, the highest since the financial crisis.
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