EU market watchdogs have warned of the risk of “correction” of commodity and bond prices as Russia’s war in Ukraine prolongs.
Elena Ross, Executive Director of the European Securities and Markets Authority (ESMA) based in Paris, said: Irish Independent Energy markets and agricultural derivatives pose “specific risks”.
She also pointed out the “serious impact” of imminent rising interest rates on government and corporate debt prices.
“Some of these markets have been very well received, but they definitely pose a risk. Overall, the market volatility is increasing.”
The European Central Bank (ECB) has laid the groundwork for raising interest rates from this summer after nearly a decade of zero interest rates and even negative interest rates. “I think changes in the interest rate environment will generally have a huge impact on financial markets.
“And that’s clearly reflected in the bond market, the sovereign and corporate bond markets, but it’s also reflected in other parts of the financial markets where changes in interest rates have a huge impact.”
Ms. Ross, a German official who spent much of her career at the Financial Services Authority in the UK, also warned consumers to cultivate all their savings into volatile cryptocurrencies.
ESMA does not currently have the authority to regulate crypto assets, but MEP wants to empower crypto assets under new EU regulations still under negotiation in Brussels.
Investors should be wary given the ongoing “lack of protection”, reflecting the official warning issued by the ESMA and the Central Bank of Ireland in March, Ross said. “Don’t invest all your money and all your investments in something that is highly volatile and has a high risk of losing all or a significant amount.”
Bitcoin, the world’s largest cryptocurrency, has recently recovered near the benchmark of $ 30,000 (€ 28,000), but is still 50% lower than it was six months ago. There is little that ESMA can do until the new EU regulations come into force, but regulators have intervened in the past to ban risky investments.
In 2018, ESMA temporarily stopped selling binary options. With speculative financial instruments, investors basically get a fixed payoff or never bet.
“In extreme consequences that are clearly harmful to investors, securities regulators are willing to act,” she said of the ban on binary options.
“It’s obviously a more extreme case, but it’s happening and I certainly don’t rule out that we might want to take such a decision again.”
ESMA is also preparing to advise the European Commission on how to regulate credit ratings for green and socially responsible investments as the search for reliable data continues.
Deutsche Bank’s DWS Asset Management Department was attacked by German police last week on charges of inflating the environmental credibility of its products.
Ross does not comment on the case, but said regulators are responsible for directing investors in the right direction for products that claim environmental, social and governance.