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.

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)

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