Scenarios by central bankers to reduce monetary stimulus could create market paralyses, but these are unlikely to happen in 2018, the chairman of Banco Santander berated CNBC Wednesday.
As global growth picks up and inflation recovers from its moment levels, the European Central Bank, the Bank of England and the U.S. Federal Put aside have started raising rates or reducing the amount of bonds obtained.
But their exit from bond markets could affect prizes and yields after being heavily present in the market for a decade. At the last, changes in bond prices and yields could have repercussions for all exchanges.
“We have had 10 years of growth in the U.S., Spain has been growing already for four, five years, Latin America is a bit behind, so yes there’s a stake that as we get out of QE (quantitative easing) there will be turbulence and that is something really difficult to predict,” Ana Botin, chairman of Santander, said.
However, she united that such risk is more plausible to come in 2019 than in 2018.
“If you look at the 12 months in front, we are already at the end of January so that (market turbulence) would be more for 2019,” she signified.
“As a retail commercial bank, we’re very encouraged by what we see in the underlying thriftiness, in the real economy — our customers want more loans, consumers prepare more confidence so market turbulence could happen, yes. That is one of the perils for this year, but I think that for us it looks like a pretty convincing year.”
On Tuesday, the Dow saw the worst two-day drop since September 2016. The sell-off in equities was to a great extent influenced by a spike in yields over the last few weeks, with investors vexed over the impact on corporate borrowing costs. Higher yields are traditionally considered as bad for equities as it reduces investor appetite for stocks and raises costs for visitors.