LONDON (Reuters) - Central bank efforts to soften the blow to markets from weakening fundamentals are losing their impact and are leaving a system vulnerable to shocks, analysts at Citi said.
The post-Brexit rebound across risky assets is largely due to central bank intervention, Citi says.
"Beneath a veneer of a stability, the system is becoming ever more highly sprung," said Citi's Matt King in a note to clients.
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The U.S. bank warns that of the adverse side effects of such interventions, such as the disconnect from fundamentals and investors' inability to benefit from diversified portfolios as cross-asset correlations spike higher.
The benefits to asset prices are also starting to fade.
While UK equities have benefited from a weaker sterling, European and Japanese stocks are stuck despite the expansion of balance sheets by the respective central banks.
(Reporting by Adela Suliman, Editing by Vikram Subhedar)