Allianz, ThyssenKrupp CEO’s Warn of New Market Bubbles

Article

The chief executives of Allianz, Europe’s biggest insurer, and ThyssenKrupp, Germany’s biggest steelmaker, have warned of new bubbles that they see developing in global markets.

“You know why nothing has changed? There is a lot of cheap money out there. Through this, investors can take higher risks. We’re currently financing the next financial bubble,” Michael Diekmann, chief executive of Allianz told Sueddeutsche Zeitung in an interview published on Saturday.

He said the European Central Bank should raise interest rates slowly in 2010, adding it would be wrong to have a long period of low rates in the current economic situation.

The financial crisis had led the ECB to flood the market with liquidity while slashing interest rates to a record-low to boost private spending and bolster up the financial sector that is coping with a credit-squeeze.

Earlier this month ECB President Jean-Claude Trichet said conditions were now stable enough for the European Central Bank to start withdrawing some of the emergency support it pumped into markets to counter the financial storm.

Diekmann’s warnings of a new market bubble chimed with statements by the CEO of ThyssenKrupp, Ekkehard Schulz, who voiced similar concerns about the commodity markets.

“This is where the next bubble emerges,” he was quoted by Frankfurter Allgemeine Sonntagszeitung in an e-mailed excerpt of an interview, ahead of its publication on Sunday.

Schulz said the commodity market was subject to “gamblers” that were trading with derivatives. “It is my concern that we will get a commodity bubble after the real estate bubble,” he was quoted as saying.

Schulz said it would take until 2012 for ThyssenKrupp — which took a pre-tax loss of €2.364 billion ($3.40 billion) in its fiscal year 2008/09 — to return to levels seen before the global economic crisis.

(Reporting by Christoph Steitz, editing by Mike Peacock)