G-20 Warns of Potential Market Risks 

Group of 20 finance chiefs and central bankers said low interest rates could lead to a potential increase in financial-market risk, as major economies rely on monetary stimulus to bolster uneven growth.

“We are mindful of the potential for a build-up of excessive risk in financial markets, particularly in an environment of low interest rates and low asset price volatility,” the G-20 officials said yesterday in a communique released in Cairns,Australia.

An increase in geopolitical risks and the faltering growth outlook in some of the world’s bigger economies have had little lasting impact on major financial markets in the U.S., Europe and in Asia, amid monetary stimulus by the Federal Reserve, European Central Bank and Bank of Japan.

“Overall, liquidity is going to remain accommodative even as the Fed begins to tighten,” said Todd Elmer, head of Group-of-10 strategy for Asia ex-Japan at Citigroup Inc. in Singapore.

The Standard & Poor’s 500 Index is in the midst of its longest streak of quarterly gains since 1998, rising last week to a record. The Stoxx Europe 600 Index has advanced in five of the past six weeks.
The extra return investors demand to hold corporate bonds instead of sovereign securities is near the lowest level since 2007, according to a Bank of America Merrill Lynch Global Corporate Index.

G-20 finance chiefs will monitor the potential increase in financial market risks, while strengthening policy frameworks, according to the communique. They also pledged to meet their exchange-rate commitments, and noted “downside risks” from geopolitical tensions.

The U.S. dollar has climbed as the Fed edges closer to its first interest-rate increase since 2006, while easing by the ECB and the Bank of Japan are weighing on the yen and euro.

 

Source: Bloomberg- G-20 Warns of Potential Market Risks

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