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Europe Since LTRO2 - A Little Context

Tyler Durden's picture




 

As Twitter and CNBC come alive with European banks ripping higher (short-sale-ban and trading a pennies will do that), Spanish and Italian equity markets ramping (to recent swing highs and the top of a four-month range on de minimus volume), while EGBs basically stagnate; we thought a little cooling reality on this white-hot exuberance was necessary. Without really wanting to steal the jam out of Draghi's donut, since LTRO2, Spain and Italy 10Y are 175bps and 71bps wider; Europe's VIX is unchanged at 23%, France's CAC and Germany's DAX equity indices are +1-2%; and Spain's IBEX and Italy's MIB equity indices are -13% and 8.5% respectively. Recency bias, summer doldrums, and an incessant hope that the status quo can really re-emerge (be printed back into existence) among what is increasingly a global balance-sheet-recession (and shadow-banking collapse) among advanced economies is indeed a powerful driver but context is key.

European 10Y Sovereign Bond Spreads since LTRO2...

 

European Equity Indices since LTRO2...

 

and Europe's VIX since LTRO2 - Unchanged...

 

Charts: Bloomberg

 

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Thu, 08/16/2012 - 12:09 | 2710875 RaymondKHessel
RaymondKHessel's picture

Markets are loco.

Au & Ag only.

Thu, 08/16/2012 - 12:17 | 2710904 khakuda
khakuda's picture

Oil is continuing its relentless climb as well.  Good job Central Planners.  Keep threatening to print more money!

Thu, 08/16/2012 - 12:17 | 2710892 Abraxas
Abraxas's picture

It seems that everybody is piling up on the same side, namely short Euro; therefore, going long Euro might be a thing to do. No?

Thu, 08/16/2012 - 12:17 | 2710909 101 years and c...
101 years and counting's picture

stolper has a buy on the EUR to 1.30.

'nuff said.

Thu, 08/16/2012 - 12:17 | 2710901 bank guy in Brussels
bank guy in Brussels's picture

Draghi's donut - ha! - nice apt term from Tyler there in the article

Am inclined to think the euro-zone can will be well-kicked into 2013 ... despite 'imminent collapse' warnings from ZeroHedge's Mark Grant and Graham Summers ... ECB will print big in the autumn as needed

And re Greece, John Ward's 'The Slog' has even more interesting detail on a current tug-of-war between EU and the Americans, as to who will pick up the Greek package and bailout ...

Either the EU printing and bribing and bailing to keep Greece in the euro-zone, or the Americans and Israel coming in with Ben Bernanke's printed bux to make Greece the new super-duper American 'ally' ...

So the Greek gov't is getting cocky with two 'offers', and Merkel has to make the decision re weakening the EU and losing the Greek oil and mineral rights to the Americans

Good reporting on Greece there by John Ward, his latest:

http://hat4uk.wordpress.com/2012/08/16/greek-crisis-why-antonis-samaras-...

Thu, 08/16/2012 - 12:24 | 2710936 HaroldWang
HaroldWang's picture

Everything will get kicked along here and there. Been that way for a while why would it change now? A new bubble in will emerge once SPX gets to 1600 and then it implodes again to start the cycle all over. Only advice is to profit off of it now until SPX gets way out of control - which should be somewhere near 1600.

Thu, 08/16/2012 - 12:29 | 2710950 spastic_colon
spastic_colon's picture

...and of course the "correction" down to 1500

Thu, 08/16/2012 - 12:22 | 2710922 Dareconomics
Dareconomics's picture

Cheap money and short-selling bans will help markets rise. Artificially ramping up buying pressure while removing selling pressure from the markets will make them rise. You can borrow money to buy stocks, but you can't borrow stock to sell stock.

 

http://dareconomics.wordpress.com/2012/08/16/short-selling-bans-keep-mar...

Thu, 08/16/2012 - 12:37 | 2710971 HaroldWang
HaroldWang's picture

How about that Dollar Tree flash crash - down 20% in 1.5 seconds. Nice!

Thu, 08/16/2012 - 12:42 | 2711001 Dareconomics
Dareconomics's picture

Europe is heading for stagflation. A weaker euro is pushing energy prices to 2008 levels, but the weak euro is not stimulating exports because world growth is slowing.

My economics professor in the 80's taught us how rising oil prices in the late 70's changed the supply curve of virtually everything. Expensive oil made everything else more expensive so that less goods were supplied at each price point.

The reason why market interventions eventually fail is...

http://dareconomics.wordpress.com/2012/08/16/super-marios-easy-money-dra...

Thu, 08/16/2012 - 12:45 | 2711011 Not Too Important
Not Too Important's picture

"Germany’s shipping industry faces a wave of bankruptcies over coming months as funding dries up and deepening economic woes across the world cause a sharp contraction in container trade."

http://www.telegraph.co.uk/finance/newsbysector/transport/9473476/World-...

It's really bad. Nothing is moving. And every leader said they were going to rebound through exports? To who?

Thu, 08/16/2012 - 12:58 | 2711054 Flaming Ferrari
Flaming Ferrari's picture

 Euro indices IBEX, CAC, MIB all breaking out to to upside. Draghi's got your back.  Gear up. Of course what he won't do is tell you when to cut and run. Details. Get buying!

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