The world's top
central bankers have delivered what seems to be a collective message
this week that quantitative easing is being put back in its box and
interest rates are going up - and global markets are taking note.
Until
then at least, stock and bonds had again been trading higher on the
premise that the total pot of global liquidity was still swelling
despite rising Federal Reserve rates - courtesy of ongoing European
Central Bank and Bank of Japan bond buying programmes, most of all.
That's why Mario Draghi's apparent change of tack on Tuesday had such an impact on every global asset from Wall Street to London and Tokyo - far more than any of the latest Fed utterances.
German Bund yields DE10YT=TWEB, a proxy for core Europe's borrowing costs, doubled, spreads between U.S. debt and almost everywhere else tightened, and a number of big banks declared the dollar rally dead as the euro EUR= put it to the sword.
SEB investment management's head of asset allocation, Hans Peterson, said the central banks and their ultra-accommodative policies were "slowly, slowly, slowly turning".
Suddenly, the usual central bank noise has suddenly harmonised over what the Bank for International Settlements - where dozens of central bankers met at the weekend - called the "great unwinding" of easy money.
Hours after Draghi spoke, U.S. Federal Reserve chief Janet Yellen was warning of high asset price valuations, a colleague was talking about putting its balance sheet on "autopilot", and Bank of England Governor Mark Carney had pirouetted from saying that now was not the time to think about rate hikes to saying they would soon have to be discussed.
Despite the initial knee-jerk moves, markets remained relatively cautious, wary that subdued global inflation and wage growth - which policymakers openly admit they are struggling to understand - will delay their reactions.
A Bank of England rate hike is now 80 percent priced-in by March next year, and Canada is at 70 percent after talk of rate rises there too this week.
But traders are still not banking on another Fed rate rise in the next 12 months, and the ECB is not expected to raise rates in that timeframe either, even if privately some of its hawkish members say it could.
That's why Mario Draghi's apparent change of tack on Tuesday had such an impact on every global asset from Wall Street to London and Tokyo - far more than any of the latest Fed utterances.
German Bund yields DE10YT=TWEB, a proxy for core Europe's borrowing costs, doubled, spreads between U.S. debt and almost everywhere else tightened, and a number of big banks declared the dollar rally dead as the euro EUR= put it to the sword.
SEB investment management's head of asset allocation, Hans Peterson, said the central banks and their ultra-accommodative policies were "slowly, slowly, slowly turning".
Suddenly, the usual central bank noise has suddenly harmonised over what the Bank for International Settlements - where dozens of central bankers met at the weekend - called the "great unwinding" of easy money.
Hours after Draghi spoke, U.S. Federal Reserve chief Janet Yellen was warning of high asset price valuations, a colleague was talking about putting its balance sheet on "autopilot", and Bank of England Governor Mark Carney had pirouetted from saying that now was not the time to think about rate hikes to saying they would soon have to be discussed.
Despite the initial knee-jerk moves, markets remained relatively cautious, wary that subdued global inflation and wage growth - which policymakers openly admit they are struggling to understand - will delay their reactions.
A Bank of England rate hike is now 80 percent priced-in by March next year, and Canada is at 70 percent after talk of rate rises there too this week.
But traders are still not banking on another Fed rate rise in the next 12 months, and the ECB is not expected to raise rates in that timeframe either, even if privately some of its hawkish members say it could.
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