Europe Ends Week Green But Notably Red On Month

Tyler Durden's picture

For the third week in a row, European equity and credit markets have remained range-bound. Equities broadly ended the week in the green with the BE500 (Bloomberg's broad S&P 500-equivalent for Europe) ending near the top of the recent range - around the pre-NFP levels from 4/5. Spain and Italy have seen improvements this week in their equity indices but they remain down notably on the month and perhaps surprisingly only the UK's FTSE 100 is in the green for the month. Credit is considerably more dispersed but also green close-to-close on the week after a strong finish today (as the dismal data started rumors of more ECB easing and QE3 lifts). Stocks and high-beta crossover credit outperformed in the liquidity rush but subordinated financials lagged on the week. Critically though, while anchoring bias might make us all feel joyous in the last few days of recovery, we remain significantly red on the month across all risk asset classes in Europe. Sovereigns followed the same path as equities and credit - with another range-bound rotation up better on bill auction success and worse on bond auction failure but as with equities/credit today's exuberance lifted them to the middle of the recent range - well off the best levels of the last few weeks. Most notably, Spanish and Italian 10Y bond spreads are over 60bps wider in April and continue to trade in a two-steps-wider-one-step-tighter rotation intra-week. Portugal is the big winner on the week (and month) when it comes to bond spreads - which are now back to mid-September levels. However - as we have tried to explain before - the massive cheapness of Portuguese bonds relative to CDS (the so-called basis) has just been too tempting and grabbing this 'risk-free' carry has provided some bid to a notably illiquid Portuguese bond market and crushed the differential between bonds and CDS. The point being - be careful in reading too much into Portuguese bond improvements as it is much more a technical arbitrage move than real money flowing into this restructuring prone nation.

Spain and Italy have seen improvements this week in their equity indices but they remain down notably on the month and perhaps surprisingly only the UK's FTSE 100 is in the green for the month...


The Spanish equity index (IBEX) has become increasingly bipolar and looks a lot like the S&P 500 did during the summer chaos last year with +/- 2 sigma swings day after day after day...

And while this week saw stocks (broadly - blue) move to the top of the recent range, they remain notably weaker on the month. Credit also is more dispersed (with financials underperforming - especially subordinated financials) and considerably wider this month...

and sovereigns also have been notably wider on the month (especially Spain and Italy)...

and as is clear from the above chart, Portugal looks like a big winner, but as is clear from the chart below, this compression in Portuguese bond spreads is convergence to CDS levels thanks to basis traders as the CDS-bond basis has compressed to 8 month tights now. The narrower the basis becomes, the less technical demand there will be for these illiquid Portuguese bonds so be careful extrapolating too much...

Charts: Bloomberg

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maxmad's picture

Green Pill or Red Pill?

French Frog's picture

The month is not over yet...

transaccountin's picture

Can you please post a Italy and Spain Bond Auction schedule. Thank you

HD's picture

Been investing since dinosaurs roamed the earth. Everything I knew about the markets that served me well over the years is meaningless now.

It's just surreal that the world economy is awash in debt and dysfunction and the markets don't even meaningfully correct anymore.

I think I finally understand why Cashin drinks so much. I may join him.

DavidC's picture

Today feels like a 'What do we do now?' day - the markets have gone dead...


buzzsaw99's picture

Why buy Euro stocks when Bernanke guarantees that usa stock always go up and never go down?

SheepDog-One's picture

Still desperate for retail to come charging in and buy all the banks toxic stocks their vaults are crammed full with.

slaughterer's picture

Somebody should open up a chain of therapy centers called:


Because these addicts have erased 90% of the losses in the DJIA this week.

Somebody get the bear's a lifeboat.   They jumped from the Titanic too early.

junkyardjack's picture

They jumped in and cracked their head on an iceberg

gjp's picture

Yep why buy into the old world when Anglo Saxon financial scheming and 'culture' (think social networking at the vanguard here) are so valuable.

SheepDog-One's picture

Big deal....bunch of funny money sloshing to and fro. Yipee. Anyones life feeling any better out there?

Mine's not....heres what I basically had to deal with while getting on a plane last nite to return home. I 'jus needs ta check ya asshole - YouTube

Communist Russians wouldnt have put up with any of this crap.

HD's picture

Well, I did get my "tax rebate" back... so nice of the government to return a small bit of the money the took from me to bailout bankers and build NSA data centers.

SheepDog-One's picture

I'm never flying again, that was it. Fascists with their retard TSA guard can blow it out their asshole....YES I do mind if ya touch my balls!

Funny Clip From South Park Reverse Cowgirl Episode - YouTube

And as far as taxes go they can forget it, I'll just keep sending back their questionaires with a note, 'prove the debt under Title 15, assholes.' (PS, they cant do it)

SheepDog-One's picture

Oh they know what it means, believe me! Check it out for yourself, United States Code, 50 codes covering all commerce, the IRS tries to operate under Title 26, Everyone believes this even tax lawyers, however they are a private for-profit debt collection agency not a govt agency so they have to operate under Title 15 which deals with commerce and debt collectors. When they know you know this, suddenly they seem to leave you alone. 

Piranhanoia's picture

Range bound, ring fenced, sterilized, sanitized, guaranteed, isolated, hypothetically derivated, circular jerkular and finally nationalized.

Anything but reality. 


SheepDog-One's picture

It's all confined to sub-prime again, I'm sure.

ebworthen's picture

UK FTSE green because London is the locus of rehypothecation is my bet.

DavidC's picture

Meanwhile, the Dow has had 8 MONTHS of green closes.


SheepDog-One's picture

And yet, it means nothing at all...except that the FED can manipulate a small group of crony stocks. 

slewie the pi-rat's picture


everything is

  • screwed
  • down
  • tight