Market Kneejerk Reaction To Italian Exit Polls

Tyler Durden's picture


If one looked at the EURUSD exchange rate or US equity futures one could be forgiven for thinking things did not go so well in Italy's election. The former is fading quite rapidly from its overnight exuberance and the latter is stable at pre-FOMC levels. However, a glance at the initial exuberant, nothing can stop us now, Italian (and Spanish) bond and stock markets and it appears the problems of the world have been solved. Spain's 10Y yield is back below 5%, Italian 10Y spreads have collapse 30bps to near multi-year lows, and Italy's equity market is up 3.5%. However, if you pause, take a breath, and look around, the liquidity is plain to see and the initial knee-jerk is beginning to retrace as investors realize that everything they knew was there before - is still there...


Where Italy goes, Spain goes and vice versa and so European Sovereign spreads have snapped lower- but have now stabilized once again (with Spain 10Y at 5% and around 335bps spread and Italy 10Y around 4.2% and 260bps spread to Bunds) at the lows of the year...


and even Italy's FTSEMIB is rolling over from its initial exuberant stop-run...


Charts: Bloomberg

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Mon, 02/25/2013 - 10:21 | 3273760 malikai
malikai's picture

I reckon we're just seeing the algos clear the book of the weak hands.

Mon, 02/25/2013 - 10:25 | 3273771 spastic_colon
spastic_colon's picture

just a preview of how everything will look as the march 1st deadline approaches where everything will be solved after and before markets close and open in the new USSA trading.....we already know the script

Mon, 02/25/2013 - 10:30 | 3273790 Levadiakos
Levadiakos's picture

I see the "most interesting man alive" is running.

Mon, 02/25/2013 - 10:23 | 3273766 hugovanderbubble
hugovanderbubble's picture

Italian stocks are the biggest short ever

Generali is in default

Mon, 02/25/2013 - 10:28 | 3273773 lolmao500
lolmao500's picture

Generali in default? Well that's very bullish since it's the second biggest insurance company in the world with 422 billion euro in assets...

Their stock is up 5% today... in default my butt.

Mon, 02/25/2013 - 10:32 | 3273795 hugovanderbubble
hugovanderbubble's picture

Who cares about Equity Value, its a freaking market without liquidity and volume


They have the biggest mismatch between asset-liabilities ratio -1,7 [|)


then AXA in France (in the second time-clock bomb)*


Long Italian CDS 2yrs

Mon, 02/25/2013 - 10:43 | 3273822 malikai
malikai's picture

Long Italian CDS 2yrs

Do let us know how well those CDS' pay out.

Mon, 02/25/2013 - 10:24 | 3273770 lolmao500
lolmao500's picture

Bullish. They should have elections every week.

Mon, 02/25/2013 - 10:26 | 3273774 Momauguin Joe
Momauguin Joe's picture

It might actually come to that.

Mon, 02/25/2013 - 10:47 | 3273829 Zero Debt
Zero Debt's picture

The faster you shuffle the card deck, the more baffled the plebes

Mon, 02/25/2013 - 10:27 | 3273777 Ribeye
Ribeye's picture

Horse futures just jumped,

Mon, 02/25/2013 - 10:32 | 3273794 Jason T
Jason T's picture

I saw that too

Mon, 02/25/2013 - 10:37 | 3273808 Sudden Debt
Sudden Debt's picture

Horse is for rich people... I'm into Pony futures...

Mon, 02/25/2013 - 12:17 | 3274117 Jake88
Jake88's picture


Mon, 02/25/2013 - 10:50 | 3273836 FederalReserveB...
FederalReserveBankofTerror's picture

Ponies are the new veal!

Mon, 02/25/2013 - 10:27 | 3273778 Haus-Targaryen
Haus-Targaryen's picture

I would imagine that Brussels has a few truckloads of Monti-Bursconi ballots waiting just in case somewhere.

Mon, 02/25/2013 - 10:28 | 3273781 hugovanderbubble
hugovanderbubble's picture

Spanish Banco Popular is in default: (but no one in Spain wants to admit it). They have cooked real estate books, valuations, and PWC audit.


Ticker: POP SM EQUITY - Will be liquidated - Equity Value _ Negative 

All its Real Estate Assets are complety junk

Covered Bonds = TNT

Mon, 02/25/2013 - 10:51 | 3273841 Edward Fiatski
Edward Fiatski's picture

Any more info on this?

Mon, 02/25/2013 - 10:29 | 3273782 Edward Fiatski
Edward Fiatski's picture

"However, if you pause, take a breath, and look around, the liquidity is plain to see and the initial knee-jerk is beginning to retrace as investors realize that everything they knew was there before - is still there..."

Bingo, Italian bonds may look more "favourable"* after this, but the fundamentals for Europe are the same as they were last two weaks - bleak.

*If only from a technical point of view.

Mon, 02/25/2013 - 10:36 | 3273793 Vashta Nerada
Vashta Nerada's picture

The market seems to be pricing in a belief that the Germans will happily forego retirement and work until 80, in order to pay the retirement costs of public sector union members of Greece, Italy, Spain, and Portugal who wish to retire at 50.

Mon, 02/25/2013 - 10:34 | 3273799 mdtrader
mdtrader's picture

No idea why the equity markets are up, but that's par for the course these days.

Mon, 02/25/2013 - 11:23 | 3273944 Albertarocks
Albertarocks's picture

I guess Goldman wants to give the world the impression that the election results (so far) from Italy somehow carry glorious implications for Europe.  Something akin to the notion that since Italy is having an election all of Europe's debt somehow gets paid in full.  It's just another of those WTF moments courtesy of the cabal because as far as I can tell, they don't even know the fucking results of the election.  On top of that, whatever those results turn out to be, they are totally, 100%, completely irrelevant, carrying absolutely no fucking implications regarding the European debt crisis whatsoever.  For the European markets to be jacked like this based on the election of a completely bankrupt economy is totally mind bogglingly assholish, not to mention as transparent as a lawyer's smile.  The DAX surges 2.5% to an all-time high?  Are those bankers f'king nuts?  Rhetorical question of course.

Mon, 02/25/2013 - 10:53 | 3273831 Dubaibanker
Dubaibanker's picture

We welcome India to the global hunger games! 

India to Buy Maximum 100b Rupees of Bonds on March 1, RBI Says

By Rakteem Katakey

     Feb. 25 (Bloomberg) -- India to buy bonds via open-market auction on March 1, RBI says in e-mailed statement.

India to buy:

7.32% bond maturing 2014

7.59% bond maturing 2016

8.15% bond maturing 2022

8.20% bond maturing 2025


Why it was done is perhaps S&P woke up RBI that their banking bad loans (read India's nemesis aka subprime loans not to mention corruption tainted loans or political favours etc) are rising rapidly.....just this morning. While we anxioulsy wait for the year 2015 to roll in, so Indian banks may start rising...from their ashes of 2013 and even more turbulent 2014 before... sigh....the year 2015 will arrive and even shit will shine! Of course, just dont smell it! ;) 

I tell you...S&P knows it all! Lol! They can predict the future. So what, if they failed everywhere, they KNOW India and what will happen in 2015//Sarc.

X-S&P Report Says Indian Banking Will Revive Only In Fiscal 2015

MUMBAI (Standard & Poor's) Feb. 25, 2013--The troubles for the Indian banking system are likely to increase in the next 12 months due to slow economic growth and sluggish fiscal reforms. However, the situation is likely to improve in the fiscal year ending March 31, 2015. That's according to a report Standard & Poor's Ratings Services published today.

Mon, 02/25/2013 - 10:56 | 3273858 SheepDog-One
SheepDog-One's picture

'Favorable election outcome' for who, the central banksters? Certainly not the peasantry.

I don't even see why they bother anymore.

Mon, 02/25/2013 - 11:11 | 3273915 Shizzmoney
Shizzmoney's picture

Democracy* is bad for the markets

Mon, 02/25/2013 - 11:14 | 3273923 Clowns on Acid
Clowns on Acid's picture

Elections ? oh yeh those MSM newsworthy things that keystrokes are wasted upon. The central bankers gave the old college try at austerity. That didn't work, so now they will now start to print en masse.
It'll take the MSM a week or so to pick up that story however.
If Bernanke says that 85B / mth is to be maintained, all other CBs will follow.
It's going to be the last straw.

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