LONDON — World bonds, equities and commodities recovered some of their recent losses yesterday and a dollar rally cooled as comments by US and Chinese central bankers eased concerns about liquidity conditions.
Reuters
Markets from safe-haven US Treasuries to riskier stocks, credit instruments and emerging market assets had tumbled for nearly a week after the Federal Reserve signaled an end to its stimulus and as signs of a credit squeeze emerged in China.
The sell-off began to lose steam in New York on Monday when two Fed policymakers downplayed the notion of an imminent end to the US central bank’s money-printing and said the market reaction was not yet a cause for concern.
Asian markets then capped a day of wild swings, during which Chinese stocks plunged to their lowest since the global financial crisis, with a late rally on hopes authorities would step in to prevent a crisis.
“After all the moves we’ve seen in US dollar buying, selling bonds, selling equities, I think we’re going into a consolidation period,” Greg Matwejev, director of FX Hedge Fund Sales and Trading at Newedge, said.
Asian shares moved into positive territory after China’s central bank committed to guiding interest rates to reasonable levels, and said it expected the factors behind a recent spike in interbank rates to gradually fade.
“China’s new leaders are determined to address the financial risks that have built in the financial system because of excessive lending,” Koen De Leus, senior economist at KBC, said.
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By mid-morning in Europe, soothing words from the two monetary authorities had lifted the broad FTSEurofirst 300 indexFTEU3 by over 1,25%, recovering some of the 5,5% lost in the previous three trading days.
MSCI’s index of Asia-Pacific shares outside Japan edged up 0,1%, having been as much as much as 1,2% lower during the day.
