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ESMA Risk Dashboard - No. 3, 2019

ESMA Risk Dashboard - No. 3, 2019

The risk landscape in 2Q19 remains largely unchanged compared with the previous quarter. In 2Q19 EU financial markets were characterised by increasing equity market prices and stable liquidity supply in secondary bond markets, with volatility episodes resulting from breakdowns in trade negotiations. Securities markets remain the key risk area based on high valuation by historic standards. Renewed concerns about weak economic growth and trade tensions have fuelled the demand for safe-haven bonds. The decoupling between equities and bond yields, together with the rapid rise in asset valuations, could be a sign of investors’ complacency and underappreciation of market risks. Looking ahead, downside risks to growth for the EU and the global economy, the escalation of trade tensions and rise of protectionist measures, the reignited search-for-yield behaviour and the persisting uncertainty about the ultimate Brexit outcome continue to be the most important risks to EU financial stability.