The European Securities and Markets Authority (ESMA) issued on Thursday its first Risk Dashboard (RD) for 2021, covering the first quarter of the year. According to the paper, the EU\u2019s securities market regulator foresees an extended period of risk due to the market corrections fueled by economic fundamentals.<\/p>\n
Fixed income valuations are now far above their pre-coronavirus levels, said the ESMA, which can be attributed partly to the continued monetary policy support by the European Central Bank (ECB). Overall, valuations in the European Union financial markets for most segments are now above pre-COVID-19 levels. \u201cThey remain highly sensitive to events and volatility, as shown by the market movements related to Gamestop and the impact that a potentially slow roll-out of vaccines had on equity prices,\u201d the regulator noted.<\/p>\n
Regarding credit, the ESMA believes the risk is likely to witness an increase due to the growing corporate and public debt levels seen across the bloc. Still, the regulator sees a \u201cpossibly significant\u201d prolonged risk to institutional and retail investors amid market corrections. \u201cThe extent to which these risks will further materialize will critically depend on market expectations on monetary and fiscal policy support as well as on the pace of the economic recovery,\u201d the document adds.<\/p>\n