Increased market volatility associated with rising trade tensions, increased geopolitical risk and policy uncertainty as well as weaker corporate creditworthiness weighed on global financial conditions in the first half of 2018, Moody's Investors Service said in a report.
While systemic financial risks have increased in the first half of 2018, credit standards continue to weaken. This means that investor risk appetite remains strong. However, credit spreads are likely to widen considerably if risks crystallize.
Moody's estimates of asset prices declined moderately in the first half of the year, while government bond prices fell from peak levels amid market expectations of higher interest rates.
The decline in stock indices in the US and other countries was the result of US tariffs on a range of countries and exports and the retaliatory tariffs on US goods by these countries.