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Global stock markets were today tipped to enjoy a “sweet spot” for some time as world leaders plough on with stimulus packages for the economy.
Finance ministers and central bankers from the US, the UK and beyond have signalled ahead of this weekend's G20 meeting in London that they plan to leave emergency measures in place despite evidence the global economy is pulling out of recession.
European Central Bank president Jean-Claude Trichet today said: “It is premature to declare the financial crisis over. Today is not the time to exit [the emergency measures].”
Analysts reckon this will deliver a “sweet spot” for financial markets with stocks benefiting as growth picks up and bonds rally, helped by a reluctance to raise interest rates.
“Financial markets will probably remain in this sweet spot for some time,” said Riccardo Barbieri, London-based head of international economics at Bank of America.
“While the economic data have almost uniformly surprised on the upside, the leading central banks have credibly signalled to the markets that monetary conditions are set to remain extremely accommodative.”
The FTSE 100 index was up 38.76 to 4835.51 today having jumped more than a third since its low of 3512 in March. The gains have been mirrored elsewhere with stock markets in the US, Europe and Asia all on the rise in recent months.
Max King, a strategist at Investec Asset Management in London, said stocks could rise another 25% by the end of next year. “There is certainly more upside to go, though you'll have to be patient,” he said.
The rally came as finance ministers and central bankers from the G20 nations met in London to work out key issues before the full gathering of leaders including Gordon Brown and Barack Obama in Pittsburgh later this month.
A staggering $2 trillion has been pumped into the global economy by central banks and governments to stop the worst slump since the Second World War turning into another Great Depression.
Germany and France, which have already pulled out of recession, now want to cut spending and implement “exit strategies” from the stimulus but face opposition from the US and the UK which are lagging behind in the global recovery.
US Treasury Secretary Timothy Geithner and UK Chancellor Alistair Darling are among those at the G20 who say it is too soon to declare victory over the recession.
European Central Bank president Jean-Claude Trichet today spelled out the conditions that would lead to an unwinding of its emergency support – but insisted now was not the time to carry out such action. “Because of their exceptional nature, these measures will have to be unwound once economic and financial conditions normalise,” he said. “We at the ECB designed the non-standard measures with our exit strategy in mind, and are ready to implement this when the appropriate time comes.” He said the exit strategy “will build on three self-reinforcing elements: credibility, alertness and steady-handedness”.
Reader views (1)
European Central Bank president Jean-Claude Trichet today spelled out the conditions that would lead to an unwinding of its emergency support. He said the exit strategy “will build on three self-reinforcing elements: credibility, alertness and steady-handedness”.
Losely translated hes saying he has'nt a clue , but when he does he will get back to us!
- Sam, London
