Spain And Portugal Dump But European Day Saved By US Pump
European equity, credit, and sovereign bond markets all started their day with a jolt. Smashing down to multi-week lows following the FX market (and US futures) implied opens. The reflexive buying began almost immediately but was slow and steady - leaving Spain and Portugal out in the cold still (+32 and 21bps respectively in the last 3 days - the biggest 3-day jump in 4 montsh). Spanish and Italian equity markets trod water near their lows through the European session but once the US opened in its magical way, they rallied 1.5% off the day's lows! EURUSD also rallied back - aided by POMO but didn't close the gap unlike US equities. European financials suffered most - as expected - but even they bounced back off earlier lows - though credit is still shouting loudly that stocks have it all wrong. Away from the mainstream manipulated measures of how awesome a 10% deposit haircutis, Swiss 2Y was in demand all day - trading as lows as 0.003% on safe-haven demand and the 3month EUR-USD basis swap (indicator of bank stress) tumbled its most in 6 weeks.
Notice the mysterious US session ramps...
But European financial credit remains far less impressed...
So given that markets know all and they have recovered almost all their losses - then why arent Cypriot banks open normally for business? Seems like credit markets think this is a bigger deal than good ol' equities for now..
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