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The Post EU-Summit Reality Reversion

Tyler Durden's picture


We know its a holiday trading day but Europe is active (if not watching Bob) and deteriorating quite rapidly. EURUSD just traded below the ledge of the initial spike after the EU SUmmit (and has retraced around 60% of the rally now). Italian and Spanish sovereign bond spreads are 15-20bps wider from their open today and have retraced over 40% of the spread compression post the EU-Summit now. Bunds are rather notably 5-6bps lower in yield (as we noted earlier the 'nein' to ESM standards relieves some risk transfer concerns for now). Equity indices across Europe are down between 0.5% and 1.5%. European bank equities are down around 1.5% on average (modest) but have quickly retraced around 25% of their post-summit gains. It appears the initial squeeze euphoria is wearing off quite quickly.

Spanish 10Y bond spreads have retraced 40% of their post summit gains...

and EURUSD over 60%...

and even the most-loved (and solved) European banks have retraced almost 25% of their gains now...

Credit spreads - both corporate and financial - have also retraced almost 25% of these post-summit gains.

While Swiss 2Y and EUR-USD basis-swaps are flat today, there recent weakness combined with a total lack of follow-through in European risk assets suggests that this 'fix' is the same as all the others and not a 'game-changer'. More importantly, with Germany's comments, it seems its a non-starter.

Charts: Bloomberg

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Wed, 07/04/2012 - 09:43 | 2586479 Desert Irish
Desert Irish's picture

Get ready for summit number 20.......this time they'll really solve Europe's problems        /sarc

Wed, 07/04/2012 - 10:51 | 2586622 Zero Govt
Zero Govt's picture

there doesn't seem to be a 'magic number' with Committees

Washington has 500 Senate and Congressional Committees (and sub-committees) yet they're still a bunch of out-of-control, no fiscal discpline ass-clowns

adding 1 to the 500, the infamous 'Super Committee', didn't get the job done either even though Nancy Peloski-Trotski was "going for $4 Trillion is savings" ..she didn't manage $4.00 bless her which would have been blown in micro-seconds in Av-Gas on her private jet back to San Francisco (way to go socialist) 

ho hum the committee process, all those wise brains around 500 US Govt tables and they still can't out-think a pack of peanuts ...ditto Europe

Houston we have a problem... none of our Committees function!!

Wed, 07/04/2012 - 10:38 | 2586627 falak pema
falak pema's picture

read the Odyssey, the journey is the aim; why are you looking for termination?

This is an existential thrill for eurocrats whose private lives are so mundane. You go from rendez vous to rendez vous with Circe the witch. She is the unpredictable bitch of all Eurocratic dreams. She invites the never ending speculative plays down her plunging bosom cleavage and it is a perpetual scream. 

Wed, 07/04/2012 - 15:17 | 2587316 WmMcK
WmMcK's picture

Long Dante's Inferno, too.

Wed, 07/04/2012 - 09:45 | 2586480 Colombian Gringo
Colombian Gringo's picture

Europe is deterioration. A region full of old white farts serviced by young muslims just waiting to kick the whiggers into the streets once they achieve a majority

Wed, 07/04/2012 - 10:10 | 2586488 Cursive
Cursive's picture

Off the highs, but still too rosy.  We may have fireworks tonight, but the real fireworks will be the ECB decision and then NFP on Friday.

Wed, 07/04/2012 - 10:45 | 2586647 crawl
crawl's picture

No doubt.  If you can't make it look good the honest, truthful way, do it the political way...dazzle them with bullshit. ECB will cut rates and mention it wasn't necessary because the banking problems are now in the past and the EZ economies are to get better (eventually, no particular year is announced) and the previous NFP number will be spiked higher so Friday's number will be a 'decrease' when in actual fact the private sector is faltering unless it's directly linked to a government handout program.

Wed, 07/04/2012 - 10:50 | 2586665 ObungaBoy
ObungaBoy's picture


They will cut the interest rate and the Wall Street “rally” will reach new high

Wed, 07/04/2012 - 09:58 | 2586503 Nobody For President
Nobody For President's picture

EU has had 19 fireworks shows, and so far they have all sort of fizzled out.

Maybe its the weather.

Wed, 07/04/2012 - 10:01 | 2586509 Falkor
Falkor's picture

Bunds - HIGHER!

Wed, 07/04/2012 - 10:17 | 2586551 Spastica Rex
Spastica Rex's picture

You can't win if you don't play!


Wed, 07/04/2012 - 10:20 | 2586563 Randall Cabot
Randall Cabot's picture

Ooops, FTSE, CAC and DAX all well off their lows now.

Wed, 07/04/2012 - 10:24 | 2586575 williambanzai7
williambanzai7's picture

This is like driving with a tire with a slow leak, every three hours you have to stop and pump it up again.

Wed, 07/04/2012 - 11:28 | 2586597 falak pema
falak pema's picture

the Eu adopts new legislation concerning the regulation of derivative trades. No more OTC, they have to be transparent and registered in a "chamber of compensations".

I hope it is a true inquisitorial chamber.

Who hasn't dreamt of becoming the new Torquemada of derivative plays ! Bringing the Dimons and Diamonds to justice! 

L'UE adopte la législation sur la régulation des produits dérivés 

operational end 2012. After the mayan apocalypse! 

In the meantime in London town, wimbledon : Federer and Djoko to meet in the semis! 

Wed, 07/04/2012 - 10:35 | 2586614 This is the end
This is the end's picture

Dax at the highs since the summit along with FTSE and CAC...Euro down but so what TPTB should want the currency down to help imports. Bond yields lower in Germany nothing but positive for TPTB. Equities significantly higher, yields lower and a currency moving down while Germany has committed nothing, what's not to like? They are playing the markets perfectly. Not quite as well as Uncle Ben who has the S&P a few percent off the highs and bond yields at all time lows without even doing anything, now that is a true maestro!!!

Wed, 07/04/2012 - 10:40 | 2586634 VonManstein
VonManstein's picture

ERRRMM stocks are rather flat! not much reality here tyler.. everything moonwalking befoer ECB BOE tomorrow

Wed, 07/04/2012 - 11:18 | 2586750 IMA5U
IMA5U's picture

when the cats away the bears shall play


doom gloom

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