GLOBAL MARKETS WEEKAHEAD-G7 rescue plan dominates investors
April 6th, 2008 | by admin |By Natsuko Waki
LONDON (Reuters) - Eight months after the credit crunch first swept the global market place, the contours of an unprecedented joint plan to fix the banking and financial system are slowly emerging.
Investors will hope this week to get a clearer idea of what this means when the Group of Seven financial chiefs discuss a range of drastic options to tackle banks and financial markets devastated by the credit crisis.
Policymakers who will gather in Washington on Friday and Saturday may also fire a warning shot at volatile currency markets as the dollar limps just a few cents away from record lows against the euro.
An expected interest rate cut by the Bank of England and monetary policy verdicts from the euro zone and Japan will also give insight into the nature of the international policy response to the ongoing crisis.
Steps being discussed by the G7-backed Financial Stability Forum include tax-funded bank bailouts to tackle a worst-case scenario, public mortgage repurchases and a sort of collective coming out of banks — simultaneous disclosure of financial positions using the same model.
Major central banks have already taken concerted action to address funding problems in the financial system, injecting hundreds of billions of dollars into money markets to ease strains in bank-to-bank lending.
Stephen Jen, head of global currency strategy at Morgan Stanley, says authorities are moving onto the next stage of the crisis management.
“They’ve dealt with one side of the balance sheets — funding. They are now crossing the line and going into assets. That would be the other side of balance sheets. It is symbolic and in practice a major step,” Jen said.
