Credit creation and the liquidity drain: why markets are falling
* Global asset prices under pressure
* QE impact waning
* Liquidity drains out of emerging markets
By Sudip Roy
LONDON, Oct 6 (IFR) - A tightening in global liquidity conditions is heaping pressure on credit and equity markets as the effects of central banks' quantitative easing wane.
Financial markets have struggled to perform throughout much of the year but reversals have worsened over the past few months.
"September is shaping up to be the worst month of the year for performance, and the year-to-date picture is no rosier," said analysts at Bank of America Merrill Lynch in a recent note.
"Events have, of course, been numerous this year, and September has been about auto scandals, but underneath the surface there are signs that the monetary policy backdrop in Europe is creating a bull market in fatigue and a bear market in credit performance."
In the last quarter, nearly every leading stock market declined sharply. The S&P 500 is an outperformer, yet it had losses of 8.68%. Continuación...