Central bankers strive to calm unruly markets

AFTER nearly a week of market turbulence, central bankers yesterday gave signs that they are willing to provide continued support to nervous investors.

The People’s Bank of China confirmed that it has recently assisted some financial institutions, despite a hawkish note on Monday.

The bank also said it would assist institutions that support the real economy if they are hit by liquidity crises. While the statement did not row back on the strict Chinese position, further deliberate tightening now seems unlikely.

Chinese markets fluctuated wildly over the day. The Shanghai Stock Exchange composite index fell by 5.8 per cent, then bounced back. Christian Schulz, senior economist at Berenberg, commented: “While it is convinced of the salutary effects of tougher policy, China is also unlikely to risk a serious financial crisis”.

In Berlin, European Central Bank (ECB) president Mario Draghi weighed in, saying that the shaky outlook still warranted monetary stimulus. Some European bond yields are on the rise again, with interest on Spanish debt hitting its highest point in 2013 during an auction yesterday.

David Miles, Bank of England policymaker, also spoke on bonds, saying: “I think some people are far too quick to label this a bubble”. “There are good reasons why yields on safe government bonds should be low today”, he added. Sir Mervyn King’s comments to MPs also suggested that central bank policy around the world would still remain accommodative.