Introduction

The Fed rate hike has been the hot topic in 2016, in which hikes were eyed
intensively by investors. During the course of 2016, there were many times there
was a good chance of a hike after the FOMC meeting but were conclusionally
postponed. It was not till December 2016 that the Fed decided on a rate hike
which by then already had a >90% chance of a hike priced in. Nonetheless, the
hike highlighted the strength of the US economy and caused ripples throughout
the financial markets in Europe as well.

During the hike in 2016 december, the European stock markets, particularly the
DAX had increased tremendously as shown. This immediately points to us the
positive impact on the equities markets and the negative impacts on the
european bonds. The rally being led by the banking, insurance and financial
stocks such as Deutsche Bank AG and Allianz. As you can see, the rise in these
stocks was primarily because the firms were able to lend at higher rates and be
able to obtain more cashflows. With money flowing to riskier assets, the price of
bonds started to fall and yields were at all-time highs. Later into the report, we
will continue to explain the detailed rationale for the above mentioned effects.

-There are 60 major stock exchanges in the world with a total value of $69
trillion. And while around 40.6% of global stock value is in North America, New
York Stock Exchange represents $18.5 trillion in market capitalization, or about
27% of the total market for global equities.
http://www.visualcapitalist.com/all-of-the-worlds-stock-exchanges-by-size/

- The bond market also has been largely dominated by the United States, which
accounts for 44% of the market. As of the year 2009, the size of the global bond
market or the total debt outstanding was estimated to be $82.2 billion, of which
the US bond market debt to be $31.2 trillion according to Bank for International
Settlements.
https://en.wikipedia.org/wiki/Bond_market
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