Fear of an End to Easy Money Prompts Sell-Off
Stock markets in the United States have hit highs and, for quite awhile, the interest rates on trillions of dollars’ worth of European government
bonds dipped into negative territory as global investors piled into these securities, confident that the central bank would continue to buy.
But in calling for prudence in policy, Mr. Draghi — who, more than any other central banker, is known for his judicious choice of words — sparked an immediate sell-off in
European government bonds as investors interpreted his use of the word “prudence” as a stepping away from the bank’s commitment to keep buying European government bonds.
By LANDON THOMAS Jr. JUNE 29, 2017
Fears that central banks would unwind years of easy money policies rattled global markets on Thursday,
prompting a sharp sell-off in European stocks and technology companies in the United States.
Even though an actual rate increase was years away, stocks
and bonds in emerging markets, long dependent on interest-rate sensitive capital flows, fell sharply in what would become a three-year bear market for the asset class.
Taken aback by the rout, central bank officials quickly said
that the speech should not be seen as a statement by Mr. Draghi that he would tighten policy immediately, but investors paid them little heed.