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European Stocks End Best Week In 5 Months On Sour Credit Note

Tyler Durden's picture





 

It has been an 'epic' week in European sovereign bonds. Whether it was returning traders or pension fund asset managers forced to reach-around, Spain and Italy 10Y spreads are 44bps tighter this week and Portugal a ridiculous 92bps (on what!!? - US fiscal cliff?), though Spain and Italy stabilized today. Broad European equities surged the most during the first 3-days of 2013 in five months (with Spain and Italy up 3.6-4%) but today saw credit notably divergent from the ongoing exuberance in stocks. EURUSD gave up some significant strength this week as repatriation flows reversed but Europe's VIX has been crushed just like in the US. Europe's Composite PMI is still below (though modestly rising) but it is the stagnation of the New Orders sub-index that should be most concerning - perhaps that is what credit is anticipating.

 

3-day change in European stocks was largest in 5 months...

 

European stock indices in general surged...

 

As did European sovereigns - except it seems some read our discussion of Spain's reacharound...

 

EURUSD is slumping as repatriation flows reverse back out...

 

Europe's VIX is crushed...

 

But credit is notably divergent today from stocks...

 

Charts: Bloomberg

 


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Fri, 01/04/2013 - 12:48 | Link to Comment WhiteNight123129
WhiteNight123129's picture

Yield are tighter on expectation of stagflation. Stagflation ironically help junk bonds and leveraged equities because it gets easier to repay debt. But hurts good credit because of duration risk on inflation.

 

Fri, 01/04/2013 - 12:49 | Link to Comment jubber
jubber's picture

France and Spain just hit new 52 week highs after hours, just Spain and Italy now for a full house, unbelievable

Fri, 01/04/2013 - 12:49 | Link to Comment nobusiness
nobusiness's picture

The bullshit just keeps on coming.  Sell gold, sell treasuries buy Small caps.  Everything is fixed by higher taxes and increased spending.

Fri, 01/04/2013 - 12:52 | Link to Comment ekm
ekm's picture

 

 

INSECT TRAP

I'll keep repeating this until everybody undestands.

Fri, 01/04/2013 - 14:02 | Link to Comment SheepDog-One
SheepDog-One's picture

Insect trap baited with vinegar I guess.

Fri, 01/04/2013 - 12:55 | Link to Comment scatterbrains
scatterbrains's picture

Lets see what IBM and XOM do in the coming weeks and months..

 

http://fiatflaws.blogspot.com/

Fri, 01/04/2013 - 13:02 | Link to Comment youngman
youngman's picture

VIX has its biggest loss in 26 years.....strange..very strange..

Fri, 01/04/2013 - 13:37 | Link to Comment derek_vineyard
derek_vineyard's picture

feels like 1999.....there's a party going on and no-one at zero hedge was invited

Fri, 01/04/2013 - 14:01 | Link to Comment SheepDog-One
SheepDog-One's picture

HOORAY! Everyone just got a 2% tax hike in payroll, probably a bunch of other new taxes in those 1,200 pages too I'm sure, and markets are within 5% of ALL TIME HIGHS!

Better work on being a 'perfect citizen' or no matter how good your stock portfolio might be, you'll get drone striked at 3 a.m. 

N: NDAA, "Perfect Citizen", Fiscal Cliff up the butt and MORE! - YouTube

Fri, 01/04/2013 - 14:07 | Link to Comment Itch
Itch's picture

Whats worse than trading for 12 hours and losing money? I'll tell you, its trading for 12 hours and making £2.  Thats 16 pence a motherfunking hour for blood sweat and heart attacks...anyone know of a good sweatshop where i can make Nike shoes or something? 

Mon, 01/07/2013 - 14:19 | Link to Comment JenniferS
JenniferS's picture

Raising capital, seems impossible for banks, (even retaining profits is difficult as scandal after scandal causes fines which diminish their earnings). Hence fast cash lending is being squeezed to achieve the new higher  ratios. So QE cash is not getting into the economy. Furthermore as the BoE now holds about hals of the Gilts in issue more QE is going to become increasingly difficult.

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