BIS Chief Economist Says Global Economy Still Struggling to Find Its Footing


BIS Chief Economist Says Global Economy Still Struggling to Find Its Footing

Trouble spots linger in global financial markets despite a period of relative calm as tensions emerged in China and other developing economies, according to the Bank for International Settlements latest quarterly review released Monday.

Specifically, it identified volatile swings in Chinese currency and bond markets plus the uncertain effects of rising protectionist sentiment and the strong U.S. dollar on some emerging market economies,

“Such tensions were just the latest reminder of a global economy that is struggling to find a safe passage towards a sustainable, financial stress-free expansion,” said Claudio Borio, chief economist at the BIS, a consortium of central banks based in Switzerland.

“In more ways than one, the long shadow of the Great Financial Crisis is still hanging over us,” he said.

The BIS report noted that in contrast to the years following the global financial crisis when global markets generally moved in tandem, recent movements have become less uniform. There were “clear winners” in the U.S. including stocks of defense, financials and manufacturing firms, BIS noted.

“In Europe and Japan, stock markets stayed relatively flatter throughout this period,” it noted, and while equities in emerging markets “recovered substantially,” the rise “”was uneven” across regions. Many emerging-market economies “appeared caught between the prospects of heightened protectionism and the financial fallout of a significantly stronger dollar,” the BIS report stated.

The period under review covered late November to late February.

“The breakdown in correlations stands in stark contrast to most of the postcrisis experience, when successive waves of risk-on/risk-off behavior tended to raise and lower all boats,” Mr. Borio said.

One other change in financial markets that the BIS alluded to was less reliance on central banks for direction than in recent years. In its publications, the BIS has repeatedly warned in recent years of the danger in markets becoming too dependent on the words and deeds of central bankers.

“Central banks once more stepped back from the limelight,” Mr. Borio said.

Source: DowJones

Source from : World Economy News