G-10's Trichet May Say Investors Under-Pricing Risk (Update1)
By Gabi Thesing
May 7 (Bloomberg) -- European Central Bank President Jean- Claude Trichet and his Group of 10 colleagues may say investors aren't taking full account of potential risks as markets surge.
``There is too much money around globally, coupled with a degree of complacency toward risk,'' said Ken Wattret, chief euro-area economist at BNP Paribas in London. ``Central banks have been too accommodative for too long, contributing to all the cash that's sloshing around the system.''
Trichet chairs today's G-10 meeting in Basel, Switzerland, after global equity markets last week advanced to the highest levels since the start of the decade. Less than three months after concern about a U.S. slowdown roiled financial markets, the U.S. Standard & Poor's 500 Index topped 1500 for the first time since September 2000, European stocks rallied to a six-year high and Asian stocks climbed to a record.
The world's major central banks raised borrowing costs last year to contain inflation and stem liquidity growth, marking the first global tightening of monetary policy since 2000.
``There's still some way to go with interest rates, at least in Europe and Japan,'' said Stephane Deo, chief European economist at UBS AG in London. ``Central banks would be happier if liquidity was under control.''
G-10 Meeting
Trichet, 64, will hold a press briefing at about 1 p.m. in Basel today after meeting with policy makers including Bank of Japan Governor Toshihiko Fukui, U.S. Federal Reserve Vice Chairman Donald Kohn and Zhou Xiaochuan, governor of the People's Bank of China. The G-10 meeting is held every two months under the auspices of the Bank for International Settlements, the central bank of the world's central banks.
Zhou said in an interview on his flight to Europe from Beijing that there's room to raise commercial banks' reserve requirements further after seven increases in 11 months failed to slow lending and inflation.
Asked by reporters in Basel yesterday if he's concerned that a bubble is developing in China's stock market, Zhou replied: ``yes.'' The nation's benchmark Shanghai and Shenzhen 300 Index more than doubled last year.
China raised interest rates March 18, Japan is gradually lifting borrowing costs from near zero and in the 13-nation euro region, the ECB has signaled it will raise its key rate to 4 percent in June, the eighth increase since late 2005.
In the U.S., the world's largest economy, investors expect the Fed to keep its benchmark rate at a six-year high of 5.25 percent until at least August, futures trading shows.
Bank of England
The Bank of England will raise its key rate by 25 basis points to 5.50 percent on May 10, according to all 61 economists in a Bloomberg News survey.
The U.K. economy expanded more than economists estimated in the first quarter, inflation accelerated at the fastest pace in a decade in March and Britain's FTSE 100 benchmark stock has rallied to the highest in almost seven years, even as the pound trades near a quarter-century high against the dollar.
The spending spree isn't limited to shares.
Mergers and acquisitions in Europe are set to surpass last year's record of $1.6 trillion, with deals worth $988.3 billion announced so far this year, Bloomberg data show.
The credit-derivatives market has doubled each year since 2003, with outstanding contracts covering $34.5 trillion of securities, according to data from the International Swaps and Derivatives Association. Trichet said last month that the market hasn't been ``stress-tested'' in a crisis.
`Full Throttle'
Ratings agency Standard & Poor's said May 2 that ``liquidity remains in full throttle,'' as a total of $72 billion was pumped into the bond and loan market in the first quarter of 2007.
``Risk-taking is increasing,'' John Gieve, the Bank of England's deputy governor for financial stability, said April 26. ``If risk perceptions were to adjust, unexpectedly large shifts in market liquidity might lead to sharper asset price changes than anticipated by market participants, with knock-on effects on counterparty credit risk,'' the bank said in its financial stability report published that day.
Even so, Trichet ``will probably reiterate that global growth is strong and has become more balanced,'' said Jacques Cailloux, chief European economist at Royal Bank of Scotland Plc. London.
The world economy will withstand a slowdown in the U.S. and expand close to 5 percent for a fourth straight year, the International Monetary Fund said April 11. Europe, Japan and China will help carry the global economy as a housing slump cuts growth in the U.S., which accounts for a fifth of world output.
More Locomotives
According to the IMF, economic expansion in the U.S. will slow to 2.2 percent this year from 3.3 percent in 2006. Growth will pick up toward the end of the year and accelerate to 2.8 percent in 2008.
The ECB forecasts the euro-region economy will expand about 2.5 percent this year after growing 2.7 percent last year, the fastest pace since 2000.
``Clearly there is more balanced growth and the U.S. is not the only locomotive of the world economy,'' Argentine central bank President Martin Redrado told reporters in Basel yesterday.
His Chilean counterpart Vittorio Corbo said financial markets are reflecting a ``very favourable world economy.'' Still, ``there exists the risk that there could be an important adjustment if we have any bad news in the world economy or in financial markets.''
The G-10 comprises the U.S., Japan, Germany, the U.K., France, Italy, Canada, Sweden, the Netherlands, Belgium and Switzerland. The members account for 85 percent of the global economy. China attends in its capacity as a BIS board member while smaller nations are invited to a meeting of world central bankers held the same day.
To contact the reporter on this story: Gabi Thesing in Basel at
[email protected]
Last Updated: May 7, 2007 03:43 EDT
dal precedente 3mld..cioè si stima SOLO una crescita di più del 30% 
ovviamente usciranno dati migliori delle stime 
