Wall Street plunges, S&P 500 erases 2018's gains

Global Equity Slump Deepens as Rate Fears Grow

The DBS CIO Investment Insights - 2018 noted that between December 1998 and January 2000, the US Treasury (UTS) 10-year yield rose 202 bps and the S&P 500 Index correspondingly gained 13 per cent.

Concerns over central bank policy and higher-than-expected inflation caused global bond markets to sell off on 29 January with 10-year Treasury yields rising to 2.73%, their highest point since April 2014, while two-year Treasury yields reached the highest level since September 2008, climbing to 2.16%. "Most of the recent moves were driven by the United States, with Treasury yields trading at nearly 2.90 percent, with at least probably some marginal willingness on behalf of investors to scale into the market again at those levels".

Monday's decline brought the Dow down 3.8 percent to 24,547.

The Toronto Stock Exchange'sS&P/TSX composite index fell 86.69 points, or 0.56 percent, to 15,519.34, shortly after the open.

Kenya police arrest opposition member current at Odinga's 'swearing in'
The court ordered a fresh election in October that Kenyatta won after Odinga boycotted, claiming a lack of electoral reforms. The government suspended the passports of 14 opposition leaders including strategist David Ndii and financier Maina Wanjigi.

For now, U.S. bond markets are setting the tone for euro zone peers, said analysts, with many expecting 10-year Treasury yields to test 3 percent soon.

Today the bond premium or spread is only 0.15% (NZ 2.98% against United States 2.84%) as NZ bond yields have not increased over recent weeks with the sharp increase in United States 10-year Treasury bond yields. After all, underlying the selloff is the fear that an unexpected bout of inflation generated by the combination of a tax cut package on top of an economy that is already supposedly operating close to its full potential, will force the Fed to tighten monetary policy more quickly than expected.

But if the current ructions on Wall Street continues, you can bet your bottom dollar that the Fed would remain gentle on interest rates, for as declared in its FOMC statements (past and present), it "takes into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and global developments".

Investors are also nervous about bond yields as the Treasury is due to significantly increase issuance this year to make up for declining Fed purchases.

Super Bowl LII: NBC announcers rise to occasion of historic thriller

In the United States, recent economic data, including Friday's wage growth and inflation, has been positive. The stock market is not the economy.

On Monday, the stock selloff accelerated, drawing investors back into lower risk bonds. This week Walt Disney, General Motors and Tesla are scheduled to report their quarterly results. To fight inflation, central banks go hawkish on interest rates.

The yen was slightly firmer at 110.08 per dollar. The Dow is down 1.5 percent for the year. Now if you reverse PE (i.e. 1/24.53 or 4.07 per cent), you get what is called the earnings yield. According to Coindesk, the price of bitcoin fell 15 percent to $6,957. On the CME, bitcoin futures plunged 19 percent to $6,975.

Telecom stocks have also fared better than their defensive peers, rising 5 percent, helped by a trailing price-to-earnings (P/E) multiple of 7.45 that is at the bottom end of its historical range and much cheaper than the broader market. Leading political parties in Germany, which is the largest economy in Europe, have struggled to form a government.

'We're battling to be first of the last' - Mourinho concedes title defeat
Mourinho has yet to reveal the full extent of Fellaini's injury although the United manager expects him to be absent for weeks. He said: "Of course we are sad for the dropped two points, but to come here and play the way we played is nearly impossible".

Britain's FTSE 100 lost 1.5 percent while France's CAC 40 slid 1.5 percent. Central bank purchases in 2018 are on the decline to the tune of $1 trillion United States dollars less in net purchases versus past year. Hong Kong's Hang Seng index sank 1.1 percent.

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