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The latest market “jolt” will be the first of many, so easy money ends, says BIS City Reuters

© Reuters. Traders Work on NYSE Floor in New York By Tommy Wilkes LONDON (Reuters) – Recent sharp sales in global financial markets are probably the first of many, as investors adapt to a world of tighter monetary conditions and the threat On economic decline, the Bank said for international settlements on Sunday. The year has been a tough one, with major drops in European and Asian stocks and even US stocks that are recently slipping into red for 201 8 after a decade long bull-run. Last quarters saw increasing fears of world and US economic growth when the trade war escalated and central banks tightened the policy or were prepared to withdraw extraordinary crisis stimulus. The "market tensions we saw during the quarter were not an isolated event," Claudio Borio, head of the monetary and financial department at BIS said. The normalization of monetary policy would be challenging, especially in terms of trade tensions and political uncertainty, Borio said in BIS quarterly review. Among the challenges posed by the global economy, Borio noted the possibility of increasing inflation, the "dark cloud" of lower nominal US corporate debt in an excessive market and weakness in the European banking sector. BIS is an umbrella group for the world's central banks and its reports are seen as an indicator of the thinking behind the closed doors for the quarterly meeting. In recent weeks, you also briefly saw U.S. Treasury bond yields rise short of medium-term interest rates, a phenomenon called a "yield…


© Reuters. Traders Work on NYSE Floor in New York

By Tommy Wilkes

LONDON (Reuters) – Recent sharp sales in global financial markets are probably the first of many, as investors adapt to a world of tighter monetary conditions and the threat On economic decline, the Bank said for international settlements on Sunday.

The year has been a tough one, with major drops in European and Asian stocks and even US stocks that are recently slipping into red for 201

8 after a decade long bull-run. Last quarters saw increasing fears of world and US economic growth when the trade war escalated and central banks tightened the policy or were prepared to withdraw extraordinary crisis stimulus.

The “market tensions we saw during the quarter were not an isolated event,” Claudio Borio, head of the monetary and financial department at BIS said.

The normalization of monetary policy would be challenging, especially in terms of trade tensions and political uncertainty, Borio said in BIS quarterly review.

Among the challenges posed by the global economy, Borio noted the possibility of increasing inflation, the “dark cloud” of lower nominal US corporate debt in an excessive market and weakness in the European banking sector.

BIS is an umbrella group for the world’s central banks and its reports are seen as an indicator of the thinking behind the closed doors for the quarterly meeting.

In recent weeks, you also briefly saw U.S. Treasury bond yields rise short of medium-term interest rates, a phenomenon called a “yield curve inversion”. A fairly reliable precursor to recession, inversion continued further investors.

BIS said, however, that the study of the financial cycle’s state makes a better job of flagging recession fluctuations than the yield curve.

Borio, Mathias Drehmann and Dora Xia said their study had found that after the early 1980s the decline was usually in economic barriers rather than significant monetary policy tightenings.

However, they did not apply their results on today’s conditions to measure the risk of a recession in the coming years.

PREVIOUS DOLLAR FUND PROVISIONS

Ever-rising US, interest rates can also squeeze on the dollar’s supply – the global financing currency chosen. But BIS said that the financial sector’s ability to increase dollar funding outside the United States could mitigate this risk.

The survey, released as part of the quarterly review, showed that non-US banks increased increasingly dollars in their home jurisdictions rather than in the United States – more than 50 percent of their dollar debt is now booked in their homelands, far above levels as see before the 2008-9 financial crisis.

As a result of this shift, dollar debt in the balance sheets of non-US banks has amounted to $ 12.8 billion at the end of June 2018, an increase of 20 percent since the end of 2009.

Growth in non-US banks in cross-border dollar funding – with banks borrowed from investors in different countries – underscores this central bank worldwide can give dollar liquidity in a crisis, the investigation by Iñaki Aldasoro and Torsten Ehlers was found.

BIS also said that banks from developing countries now account for more than 12 percent of global cross-border lending, up from approximately 3 percent in mid-2008, as they raise lending to emerging market companies.

In many countries, more than half of cross-border borrowing is funded by companies and financial institutions, excluding banks of lenders based on other emerging markets.

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