By David Collins of the Bank’s Markets and Trading Systems Division.
The major global event in financial markets was the emergence last summer of difficulties in the Asian tiger economies, which have had a widespread impact on financial markets. The associated downturn in major equity markets outside the region was quickly reversed, and concerns are again being expressed (as they were before the Asian crisis) about the sustainability of current equity index levels. Financial markets in Europe—particularly the bond markets—have been heavily influenced during the past year by the prospects for Economic and Monetary Union at the start of 1999. Government bond yields of likely member countries fell towards those of Germany, though ‘convergence trading’ has now largely ceased.