Markets grow confident on continued support

Extensive policy support has infused markets with a renewed sense of optimism. Continued economic weakness has led to extensive monetary easing and a moderated stance on fiscal rigour. The resulting fall in perceived downside risk has buoyed markets and encouraged flows into riskier asset classes. As safe haven flows reversed, funds surged into equities and higher-yielding debt instruments, including those of emerging markets and the euro area periphery. But macroeconomic performance has yet to catch up with the renewed market optimism.