European stock markets opened with further falls this morning following substantial losses on global markets yesterday.
The moves have been prompted by a massive selloff of bonds around the world.
The interest rate on US 10 year borrowing hit its highest point in seven years yesterday.
Paul Sommerville, of Sommerville Advisory Markets, explained that the shift in investor sentiment is primarily in response to interest rates going up in the US.
"Bond yields have been going up for two years but the pace is increasing. The US Federal Reserve put up rates in recent weeks. They're expected to do so again in December. That would be the ninth time in this cycle. Next year, we expect them to raise three times.
"The US is trying to end its policy of Quantitative Easing and enter a period of Quantitative Tightening. In Europe, no rate increases are expected just yet. As rates in the US go up, the demand for the dollar rises. That causes trouble for emerging markets in particular, because they've borrowed in dollars," Mr Sommerville said.
So why has the selloff extended to stock markets? If the US economy is performing strongly, should the stock market not rise in tandem?
"Yields on bonds are going up because of signs of inflation in the US. The economy is doing well but, don't forget, valuations on the US stock market are very high. If you're not getting interest in your bank and you went into stocks, you might say you'll sell stocks and move into the bond market," Paul Sommerville said.
Investors, and anyone who has a pension, should take note of this shift in sentiment. However, the picture is slightly complicated in that the change is happening in the US, but not in the euro zone.
"Stocks are looking less attractive so investors are moving into the bond market. But this is in the US bond market. It's a different picture in Europe where the interest rate on bonds is negative.
"Here, the two year yield is negative, meaning you pay the Irish government if you want to go into Irish bonds. In the US, the yield is at 2.6%," he said.
The moves came after the Dow Jones hit a record high earlier in the week.
The S&P 500 share index, which tracks the 500 biggest public companies in America, recently clocked up the longest bull market in US history - around nine and a half years.
That's a period without a correction of 20% or more.
Many analysts think stocks are over-valued. Is the bull running out of steam?
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