While many are celebrating the all-clear again as Spain manages to sell
Spanish bills to Spanish banks at a huge risk premium to the last time it did
the same, it is perhaps not surprising to hear that this was the biggest
gain for the broad European equity market since November. What concerns
us most is the absolute schizophrenia that the market is
undergoing as the swings in European (and for that matter US) markets is
extremely reminiscent of the absolute chaos that reigned last summer as
markets suddenly flip-flop +/-2 standard deviations. The sad fact is
how quickly our memories
(or the algos that surround us) forget just last week we saw the
same - exact same - euphoric response to Italy managing to sell short-term
Italian bills to Italian banks (again at a significant yield premium to
their prior attempt) and the mainstream-media's irrational pump that this is
somehow important or noteworthy (remember even Greece managed to sell
short-dated bills during the middle of its PSI discussions). European
equities are back to pre-NFP levels (same as last week) and credit
markets have snapped tighter today (just as they did last week as they got
squeezed). This time, however, financials are lagging still and the squeeze in
credit is not as hard as overall they remain less ebullient than equities.
Sovereign spreads are following the same path as last week
also, Italy and Spain yields compressed - though we note that they
remain (especially Spain) notably wider than last week's rally. Will the rest of
the week play out in a similar manner to last week? As longer-dated auctions and
financials weigh heavily on risk sentiment?
European equity markets see biggest gain since November after also seeing biggest fall since November just a few days ago...
And for some comparisons, here is the last week equity vs credit performance...
And European Sovereigns following the same path as last week...
And the day so far in US markets has been - umm - interesting in its schizpohrenia across asset classes also...
Next Step?
Charts: Bloomberg
European equity markets see biggest gain since November after also seeing biggest fall since November just a few days ago...
And for some comparisons, here is the last week equity vs credit performance...
And European Sovereigns following the same path as last week...
And the day so far in US markets has been - umm - interesting in its schizpohrenia across asset classes also...
Next Step?
Charts: Bloomberg
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