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The AMF issued its Economic and Financial Newsletter noting that the world’s major stock markets suffered further and severe turbulence during the summer.
Although the state of the
The subprime crisis halted the rally at precisely that point, however. Confined initially to fixed income markets, the crisis spread quickly to equities and interbank markets, becoming systemic in the process.
Naturally, the correction to financial stocks was particularly severe because of uncertainty over the exact magnitude of financial institutions’ exposures to mortgage risk.
Stock markets entered a recovery phase in the second half of August. By month's end the major indices were again in positive territory for the year to date. The newfound market confidence stemmed from such factors as massive liquidity injections from central banks, the Federal Reserve’s decision to cut its discount rate 50 basis points and reassuring economic data suggesting that the
Despite the rebound, signs of pressure were still evident on the markets at the beginning of September. Implied volatility remains relatively high, indicating that stock markets are expected to continue fluctuating widely in the future.