SSDD: Gold Soaring, Europe Plunging...Despite Short Selling Ban
Update: it begins - Fiat (FI.IM) and Exor (EXO.IM) are halted. Look for Intesa and Unicredit to follow any second.
It was fun while it lasted, or all about 6 days. Following the imposition of the continental short selling ban, Europe managed to prevent the now daily occurrence of halting trading in key financials... for almost a week. But not quite. We fully expect that UniCredit (down 5.3%), Intesa (down 4%) or Fiat (down 8%) wlil be halted any second, despite the fact that nobody is shorting them. All that was necessary for a return to the status quo, or for Europe to be open. Following news from the WSJ overnight that the Fed is "concerned" about European bank funding (a story which is such a glaring plant: why on earth would the Fed of all entities invite contagion by indicating that the funding pyramid, at whose base it itself is located courtesy of the unlimited FX swap lines), which in turn used data first broken by Zero Hedge yesterday namely that "In one sign of how European banks may be having trouble getting dollar funding, an unidentified European bank on Wednesday borrowed $500 million in one-week debt from the European Central Bank, according to ECB data. The bank paid a higher cost than what other banks would pay to borrow dollars from fellow lenders. It was the first time for that type of borrowing since Feb 23", has led to every index in Europe is plunging, and at last check US futures were down over 20 points. Why would use its traditional mouthpiece the WSJ to spread fear? Why QE3 of course. As we will never tire of repeating, the market has to fall another 20% for another easing episode to be feasible. And what better way for this to happen if you are Ben Bernanke? Why hit them where it really hurts - European bank stability of course. Oh yes, all of this has sent gold to just under all time record highs at $1810, pretty much as also expected.
Keep an eye open for headlines of an imminent FTSE MIB breakage, following the sequential halt of all Italian financial stocks as Europe now scrambles to come up with another even more harebrained idea as a last ditch protection for its insolvent capital markets.
We also expect another "emergency" meeting between Sarkozy and Merkel to be announced momentarily if the DAX plunge, fat fingered or not, continues.