Capital markets

Against the backdrop of the after-effects of the financial and economic crises, the market climate for equities was still characterised by considerable volatility and uncertainty. Among other things, the overextended state of national budgets in several European countries prompted marked fluctuations during the year. Yet despite this volatile climate European equity markets remained relatively stable. The German market, in particular, was able to divorce itself from the broader context and closed the year with sizeable price gains. US markets also moved higher, and by the end of the year major indices such as the Dow Jones and DAX had consequently surpassed the levels of the previous year.

Owing to the continued expansionary monetary policy in our main currency areas, yields on many government bonds fell to record lows during the year. The yield on ten-year German government bonds declined to 2.1% at one point. These levels were assisted by a monetary policy that remained committed to a strong supply of liquidity as the prescription for combating the economic and financial crisis. Most central banks were a long way away from raising key interest rates. Spreads for bonds in countries on the European periphery increased sharply in light of the historic deficits, however, prompting stronger demand for German government bonds as a secure form of investment.

The value of the euro fell against other currencies, such as the US dollar or pound sterling, during the year under review.