Uncertainty spoils the optimism
The continuing threat of war in Iraq tended to overshadow news about the course of the global economy in recent months. A mood of investor optimism in October and November 2002 had buoyed equity and corporate bond markets and made yield curves steeper. Starting in December, however, uncertainty about the economic consequences of a possible war began to weigh more heavily on the markets. Once their optimism had dissipated, investors seemed to attach little significance to major economic news. By the second week of February, the war premium had taken back most of the late 2002 gains in equity markets. Yield curves had become somewhat flatter than in late November but continued to price in an economic recovery, albeit a more modest one.
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The views expressed here do not necessarily reflect the views of the BIS member central banks.