The past few months have seen the macroeconomic outlook brightening, and there is realistic scope for a reduction in risk levels if improvements in financial markets prove resilient in the medium-term.
The European Securities and Markets Authority (ESMA), the EU’s securities markets regulator, today publishes the second Risk Dashboard for 2021,
covering the third quarter of the year. ESMA maintains risk
levels unchanged, at a high level, as the market environment remains
defined by very high uncertainty, continued elevated asset valuations
with risk of price corrections and abrupt shifts in risk premia.
Market reactions to the issues related to Evergrande
have shown the continued importance of event risks, the reactivity of
markets to such events, and the continued potential impact on investors
and financial stability going forward.
The past few months have seen the macroeconomic outlook brightening,
and there is realistic scope for a reduction in risk levels if
improvements in financial markets prove resilient in the medium-term.
This critically depends on the ability of markets to withstand the
potential future phasing out of the pandemic-linked public and monetary
support without material disruptions.
The most important risk drivers for the quarter are the economic
outlook, inflation uncertainty, indebtedness in sovereign and private
debt markets and political and event risks. Looking ahead, the scars of
the pandemic, its resurgence in Q4, and uncertainty around inflation and
the continuation of fiscal and monetary policy support may exacerbate
long-term vulnerabilities both for the financial and non-financial
sectors.
ESMA
© ESMA
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