European Stocks Discover VIX Algo; Bonds/EURUSD Ain't Buying It

Tyler Durden's picture

While not to the level of US sophistry, European equities enjoyed the day driven by further compression in Europe's VIX. The big winners were Spanish and Italian stocks (now up 2% on the week) as Europe's VIX drops to one-month lows. However, the correlated risk-on awesomeness did not flop over into anything but the high-beta nominal prices of equities. EURUSD slid all day (with a slight bump into the close); Italian and Spanish sovereigns bled wider all day (with a slight give back in the latter part); and corporate and financial credit stayed wide as stocks soared. With EUR weakness (remember the Fed/ECB framework), we wonder if European equity strength is merely rotation from US to Europe? Or is it merely front-running the sell-the-news event at the ECB tomorrow?


Europe's VIX motivated equity's correlated bid early on today...


The equity vs debt and FX divergence...


and stocks and credit are diverging notably ahead of tomorrow's ECB meeting..

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SuperDeDuper's picture

blah blah blah, market isnt going to crash.

kliguy38's picture

just slowly turning the heat up under that pot of water you're sitting in......ribbit

asteroids's picture

Tomorrow being an "ECB" day, just like "FED" days. The major markets in Europe WILL close in the green.

Inthemix96's picture

Herman the Van rumpoy has assured the world that Europe is now fixed.

He says drinks round at his 6pm sharpish to toast an end to the worlds problems.

My mates going.  He reckons he is going to strangle the little goylem looking cunt.  Now thats a toast worthy of toasting.

Ghordius's picture

Gollum should just keep his mouth firmly shut. period

DeadFred's picture

Don't you love when the central banksters compare notes on the newest ways to jimmy the markets? I wonder how long it will be before the computer traders get a clue and drop VIX from their algorithms?

Joe moneybags's picture

The VIX does not trade directly, as it is only a measure of the premia on near-month S&P options.  When the hundreds of thousands of individual buyers of those options pay a higher or lower premium, the VIX rises or lowers respectively, the way a thermometer measures heat.  The VIX is indirectly played (bet upon) by speculation in futures contracts, which in turn have derivatives on those contracts.  Buying or selling pressure on those contracts does not affect the underlying VIX, since you can't go long or short the vix directly to hedge your derivative position.  So, don't buy into VIX manipulation theories.  I am not contending that the S&P is not manipulated by the biggest players, since it can be both bought/sold and hedged directly.

Panafrican Funktron Robot's picture

"So, don't buy into VIX manipulation theories."

Conspiracy theories have a funny way of being conspiracy facts.

disabledvet's picture

What's the connection between Europe and the USA again? I did here there was talk of forming another Free Trade Agreement between us two. That would be news. I'm not sure how much "sovereign credit" (by country) matters anymore as euro denominated debt only knows euro wide returns. You could see some amazing M&A activity...especially on the retail side. Also "structured products" could do well as EZ players try to put off the debt reckoning "to stay competitive." I see Facebook has soared. Phone calls in our heads coming soon? "Thought speech" being perfected? I'msensing a Broadway "Musical for the Mind" opening soon. "no one says a word, no instrument is played... but everyone is dancing."

MillionDollarBoner_'s picture

NISD in San Antonio, Texas

O/T - Electronic Tags on Innocent Kids

Sorry if you already saw this but I'm seeking momentum on what seems to be a big issue which is as yet under the radar. Maybe someone can do an article on this (GW?!?)

Looks like the start of a slippery slope to me.

Next pre-school kids "for their protection"; then adults "Sir, why wouldn't you want us to know where you are? What have you got to hide?" etc.

This seems like a big issue which is as yet under the radar.