Link Securities | The ECB’s Financial Stability Report warned yesterday that high valuations in increasingly concentrated asset markets increase the risk of sharp price adjustments. In the report, the institution noted that, since April, global stock markets have reached new all-time highs and credit spreads have remained tight in historical terms.
In addition, the ECB warned that market confidence could change abruptly due to a deterioration in the growth outlook or discouraging news about the adoption of Artificial Intelligence (AI). Like other central banks, the ECB noted that there could be liquidity mismatches in open-ended investment funds, pockets of high leverage among hedge funds, and opacity in private markets. Other potential vulnerabilities include fiscal challenges in highly indebted countries, which could put pressure on the bond market and affect the Eurozone if there are changes in capital flows.
