Friday, 9 October 2015

World stocks rise amid calls to maintain monetary stimulus

World stocks rose on Thursday after the release of the minutes of the last Federal Reserve monetary policy meeting showed that it wanted to wait for evidence that a global economic slowdown was not seriously affecting the US economy before raising interest rates.

The cautious stance of central banks appears to be pervasive. From Reuters:

Central banks have little room for error in a low-growth world in which over-leveraged and commodity-dependent emerging economies and a slowing China are major risks, top international financiers told the International Monetary Fund's meeting.

Despite $7 trillion in quantitative easing from banks in industrial nations since the global financial crisis, the world is stuck in a "new mediocre" growth pattern, IMF chief Christine Lagarde said on Thursday.

Maintaining loose monetary seems to be the preferred stance.

The IMF has urged the Fed and the Japanese and European central banks to wait for more signs of recovery before tightening. Lagarde on Thursday repeated her plea to Yellen to stay her hand.

This is despite the seemingly never-ending series of bubbles pervading the global financial landscape. Bloomberg reports possibly the latest one in China:

As a rout in Chinese stocks this year erased $5 trillion of value, investors fled for safety in the nation’s red-hot corporate bond market. They may have just moved from one bubble to another.

So says Commerzbank AG, which puts the chance of a crash by year-end at 20 percent, up from almost zero in June. Industrial Securities Co. and Huachuang Securities Co. are warning of an unsustainable rally after bond prices climbed to six-year highs and issuance jumped to a record.

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