Mkt rally conceals deep cracks in world economy, BIS warns

Recent gains in financial markets don't adequately reflect dangers looming from higher sovereign debt and disrupted world trade, the Bank for International Settlements warned.

- Bloomberg

Investors in both stocks and credit, cheered by prospects of government spending and lower borrowing costs, have driven buoyancy that might paint a brighter picture for the world than warranted, the Basel-based institution said.

"This very sanguine assessment seems to be disregarding some of the very real challenges in the real economy," Hyun Song Shin, head of the BIS's monetary and economic department, told reporters.

Markets are "vulnerable to repricing from bad news," he added.