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Europe Relishing Short Covering Ban For Now With FTSE MIB Still Broken

Submitted by Tyler Durden on 08/12/2011 07:03 -0400

A quick update on market metrics this morning indicates that Europe has so far refused to protest violently against the short covering ban, and is for the time being enjoying the eye of the hurricane. According to the Bloomberg cross asset dashboard there is a sense of modestly improved sentiment in Europe as CDS spreads have mostly tightened for sovereigns and banks, following the French, Italian, Spanish (and Belgian? - they have a stock market? Must be to go with that government of theirs) ban on short sales as evident in:

Soc CDS for France -14.5 bps, Germany -6.7 bps, Italy -14.6 bps, SPain -14.9 bps, Greece -22.7 bps, Portugal -41.5 bps, and Belgium -27.1.
French bank CDS: SocGen -3.8 bps (just barely tighted after blowing out), UniCredit -12.6 bps, BNP -6.7 bps, Credit Agricole -11.7 bps
Bank funding pressures easing as Euribor, Libor/OIS spreads, 1 year euro basis swap moderately improved
Equities up 1-1.5 standard deviations, led by Euro Stoxx +2.1% on the short-sale ban
and most EU yield spreads to Germany moderately tighter

In summary: we are seeing a selling pause until the next glaringly obvious negative thing becomes a thorn in the side of investors (not to mention flashing red headline), only this time due to the inability to hedge long positions, they will be forced to sell all holdings. As a reminder, this happened in Greece earlier and the other PIIGS, when courtesy of DTCC it was made clear that one can't hedge cash bonds, and the result was a waterfall in selling of cash exposure.

In the meantime, those trading the FTSE MIB, good luck after the market appears rather busted for the second day in a row:

Interactive Brokers Bulletin Board

To IDEM traders:
Fri Aug 12 03:46:53 2011 EST

The exchange has disabled "Stop Limit" order type functionality for today on all products tradable on the IDEM market.

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Fri, 08/12/2011 - 07:10 | 1553598 oogs66

this gives what, a couple days of relief? if they don't do something big in that window, who is going to buy on the next down leg? don't they realizing they are setting up for the ultimate crash by doing this?

Fri, 08/12/2011 - 07:31 | 1553626 HelluvaEngineer

I think Monday will be a very interesting day. Today - probably very boring melt up.

Fri, 08/12/2011 - 07:46 | 1553650 spiral_eyes

Meanwhile, over in fairyland, Krugman calls for more riots:

http://azizonomics.com/2011/08/12/krugman-calls-for-more-riots/

Fri, 08/12/2011 - 08:21 | 1553713 jus_lite_reading

edit: sorry about my rants

early morning no coffee

anyways expect a big melt up today followed by all hell breaking loose on monday

bless you

Fri, 08/12/2011 - 07:11 | 1553601 FoieGras

Europe loves central planning. They practically invented it.

Fri, 08/12/2011 - 07:34 | 1553634 Curtis LeMay

No shit, eh?

And in fact they really did invent it.

Marx, Engels and Hitler weren't Martians after all - they were "Europeans"...

For fucks sake return the D-Mark before we all go under...

Fri, 08/12/2011 - 07:12 | 1553602 BandGap

Calm before the shitstorm.

Fri, 08/12/2011 - 07:27 | 1553615 hugovanderbubble

http://www.rankia.com/respuestas/896637/fotos/51970

Fri, 08/12/2011 - 07:12 | 1553603 Badabing

One more day and we make it to the weekend, did you think we would make it?

So lets see today is a even day so stocks down. no QE stealth.

Fri, 08/12/2011 - 07:16 | 1553605 warchopper

Bring on the RALLY! Europe's problems are over!

Fri, 08/12/2011 - 07:16 | 1553606 johngaltfla

Did they give their markets some Sake and a prayer in front of a Buddhist shrine before they did this?

Japan did that at least that small act for their Kamikaze pilots before they sent them on a mission like this to flame out.

Fri, 08/12/2011 - 07:17 | 1553607 william shatner

Yes, there's a ban on short selling in Belgium but they told us it was pre-emptive.

There is, I repeat, there is absolutely NO problem on the Belgian stock market.

Now walk along, nothing to see here.

Fri, 08/12/2011 - 07:18 | 1553608 Gringo Viejo

And today's fraud de jour is.....................

Waiter! I'm ready to order now........................

Fri, 08/12/2011 - 07:30 | 1553622 Tic tock

European Banking Ice Age

Fri, 08/12/2011 - 07:32 | 1553629 entendance

<...Banks bought

these bonds to earn high rates of interest. They took a risk, and now want to take the money — and make taxpayers pay. This is morally repugnant.>

http://www.entendance.com/forums/viewtopic.php?f=7&t=490&p=18705#p18705

Fri, 08/12/2011 - 07:38 | 1553638 Scalaris

At last - I always said that ban on short selling was the way we could fix the economy.

Like an ostrich burying its head while a nuclear missile is falling from the sky.

Fri, 08/12/2011 - 07:55 | 1553666 speconomist

Hey guys, which platform or broker do you use to be able to play with the CDSs? Interactive Brokers??

Or some other one I don't know?

Fri, 08/12/2011 - 08:02 | 1553679 Hannibal

NAKED SHORT SELLING IS ILLEGAL.....PERIOD!

Fri, 08/12/2011 - 08:33 | 1553704 FunkyOldGeezer

I would have thought some of you might have been extolling the virtues of this ban. After all, isn't it one way in which sovereign states (through pressure on the stock market authorities) actually get to put a finger up to the villainous banks and their cohorts, the big money folks who couldn't give a damn about anyone?

Proposing this is nonsense, is actually condoning the big banks and accepting they rule the world, isn't it?

So I guess, despite all the protestations to the contary, everyone here enjoys having the big banks as their masters and you all deny the existence of sovereignty for any country.

Oh! and I take exception the the term 'investor' being used in the lemming like short selling that has taken place so far. THese people are not investors, that's why things go down waaaay more quickly than they ever go up. They are speculators, all of them, pure and simple.

just my 2 cents.

Fri, 08/12/2011 - 08:20 | 1553712 reload