FRANKFURT -- European Central Bank President Jean-Claude Trichet said on Tuesday the volatile market movements of recent days could be seen as a normalisation of risk pricing, and urged investors to keep their composure.
His comments were echoed by ECB Governing Council member Axel Weber, who also said contacts with German banks confirmed his view that they were well protected against higher risks in certain business areas, and any losses would be limited overall.
"I call on all parties concerned to continue to keep their composure. This attitude has been welcome and effective in the recent days," Trichet said in a statement distributed by the ECB.
"We experience a period of market nervousness, a period in which we see increased volatility in many markets and a significant re-appreciation of risks."
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He said money market conditions were now returning to normal, although the ECB and euro zone central banks would continue to monitor the situation.
Global central banks have pumped extra cash into markets since last Thursday to calm panic over exposure to complex credit derivatives linked to defaulting U.S. mortgages. But most was made up of short-term lending to banks that must be repaid the next day, and has since been withdrawn.
Weber, who heads the German Bundesbank, described the market moves as "abrupt" but said German and euro zone economic fundamentals remained sound.
"On financial markets a normalisation is currently taking place. The turn-around from high risk appetite to more risk aversion is, however, taking place abruptly and leading to nervousness and overreaction in several market segments," he said.
"Regardless of the latest tensions in some financial market segments German and European economic data remain positive. They indicate a continuation of the robust and broad-based economic upturn."
Economic growth in both the euro zone and Germany slowed to 0.3 percent in the second quarter of 2007, slower than the first quarter and weaker than analysts had expected.
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