European Stocks End Week At Highs, Credit At Lows

Tyler Durden's picture


It was the best of times, it was the worst of times. That just about sums up the divergence of opinion among credit (bad) and equity (good) traders had as the week ended on a very sour note for bonds. Financials, which have seen nothing but compression and exuberance, have swung notably wider in the last 36 hours or so - as the spectre of the repayment of LTRO begins to show forth. Meanwhile, stocks are flatly ignoring that reality and close (broadly) at the highs of the week. Sovereigns in general trod water (+/-5bps) except for Spain which rallied 21bps (of course it did, the awesome bad loans data must have been the bad-is-good driver?). EURUSD also started to sag today back to its lows of the week - even as Swiss 2Y rates broke back above 0% for the first time in 9 months.


European credit (most notably financials) underperformed...


European Sovereigns were flat aside from Spain...


EURUSD weaker...


Swiss 2Y Rates positive for first time in 9 months...


Meanwhile LTRO Stigma (the spread between LTRO encumbered and non-encumbered bank credit) remains near its medium-term lows and while paybacks will theoretically reduce the encumbrance, we suspect the reduction in fungible capital will have a more negative impact and widen the LTRO spread...


Charts: Bloomberg

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Fri, 01/18/2013 - 13:06 | 3166553 Falconsixone
Falconsixone's picture

That must be the markets credibility. Makes sense.

Fri, 01/18/2013 - 13:32 | 3166634 Snakeeyes
Snakeeyes's picture

Amazing given the lousy economies of Europe and their staggering spending and debt loads. Forward!!!!!!

Fri, 01/18/2013 - 13:07 | 3166558 SheepDog-One
SheepDog-One's picture

It was the manic of was the depressive of times.

Fri, 01/18/2013 - 13:07 | 3166560 Cognitive Dissonance
Cognitive Dissonance's picture

"Meanwhile, stocks are flatly ignoring that reality and close (broadly) at the highs of the week."

I reject your reality and substitute my own. 

Fri, 01/18/2013 - 13:29 | 3166632 Panafrican Funk...
Panafrican Funktron Robot's picture


Fri, 01/18/2013 - 14:16 | 3166797 falak pema
falak pema's picture

this is typical of an oligarchy market; we protect ours and we only protect that; nothing else. Too bad for the small entrepreneur, he is in the deflation crosswires, and he gets no loans from us.  

Big gets bigger, small gets creamed. And the P/E of the big guy goes ballistic. Meanwhile to support their real markets the CBs wage currency war, so its a shock producer that the markets will find difficult to ignore...VIX....


Fri, 01/18/2013 - 14:17 | 3166803 orangegeek
orangegeek's picture

The Euro is completing wave 2 up.


When wave 3 down kicks in, markets and commodities should fall hard.

Fri, 01/18/2013 - 15:04 | 3167040 Salah
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