Financial markets increasingly sensitive to sudden events: BIS

Zurich

SUDDEN swings in financial markets recently suggest they are becoming increasingly sensitive to unexpected events, the global organisation of central banks said on Sunday, warning that "more than a quantum of fragility" underlies the current bullish mood. MSCI's all-country world stock index is hovering around multi-year highs after rebounding from sell-offs in August and October.

The downturns were triggered by uncertainty over the global economic outlook and monetary policy, as well as geopolitical tensions, and the Bank for International Settlements (BIS) said the sharp and sudden dips pointed to frailty in the markets. "These abrupt market movements (in October) were even more pronounced than similar developments in August, when a sudden correction in global financial markets was quickly succeeded by renewed buoyant market conditions," the BIS said in its quarterly review on Sunday. "This suggests that more than a quantum of fragility underlies the current elevated mood in financial markets," it said, adding that recent developments suggest markets are becoming "increasingly fragile". "Global equity markets plummeted in early August and mid-October. Mid-October's extreme intra-da…