Worst Day In Europe Since Rally Began

Tyler Durden's picture

While we have noted the comparative weakness in European credit and sovereign markets, stocks had so far remained hopeful until today. Bloomberg's broad BE500 index of European stocks fell 2.8% today, its worse performance  since mid-November when the recent rally began. This one-day drop has wiped out the gains of the last five weeks in stocks and credit is even worse as it continues to lead risk lower. European financial stocks are catching up to European credit's weakness (and we note US financial credit is really coming off today). Whether or not to BTFD is the question. We note that this sell-off is much more broad-based with stocks and credit dropping together (instead of just credit last time) and across asset classes the weakness is in CONTEXT with broad derisking. Furthermore, Sovereign credit stress re-emerged with Spain and Italy up 26bps and 18bps on the week as the former is now at almost 4 week wides. At some point, we wonder when MtM losses will hit all those aggressive Italian and Spanish banks who loaded up on chaotically procyclical carry trades?

BE500's weakness today is impressive...

Amazing that credit has been priced with some contagion premium for Greece for a while but now finally stocks are starting to reprice for that also. Note that Senior financials are underperforming (as the LTRO and ECB subordination gets priced in)...

European financial stocks finally catching up to reality in the credit markets (and US too)...

and across all sovereigns, CDS underperformed bonds but both were weaker with Spain worst (followed by Italy)...

As Spanish 10Y spreads rise above their February average (leaving all those late to the game carry traders suffering already).

 

Stocks are falling in CONTEXT with broad risk assets (with TSYs and AUDJPY looking to more weakness)...

US Treasuries are now 7-8bps off their highs last night as EURUSD breaks below 1.3150 and AUD continues to drift. Commodities are stabilizing here though down significantly (with WTI below $105 still).

Charts: Bloomberg

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SilverIsKing's picture

You may be putting the same headline up tomorrow.

knightowl77's picture

or everyday for the next few weeks....

resurger's picture

i was really amazed on how the blatant lies on Bloomberg that the S&P is the lowest since 27 years!

 

TheSilverJournal's picture

Or just until the next FOMC meeting next Tusday, March 13. The artificially created "deadline" of March 8 to get the bond holders to agree to the Greek deal is in perfect timing to disappoint the market and smack oil and PMs down hard to show there's no inflation, and the for the Fed to deliver their $920B of MBS purchases. Come March 20, Greece will make its payment.

TheSilverJournal.com

JeremyWS's picture

Well Gold and silver may not have stopped for today, they've seemingly just broken out of a bear flag. maybe more to come?

SilverRhino's picture

They are down ... fuck it .. let them drive it to 25 short term.   Financial gravity will catch up.

Even things in LEO orbit eventually hit Earth hard. 

 

carbonmutant's picture

Sounds like it's time for Mario's Big Bertha to spread some more cheer...

trilliontroll's picture

As I said before 10 000 000 000 000 € LTRO

YesWeKahn's picture

Mark to Market? I thought this is only allowed to be used when the value goes up.

BliptoP3's picture

What's this "Market" you speak of?

Vince Clortho's picture

A term widely used in the 20th Century to designate the NYSE, the NASDAQ, etc. when they were loosely based on free trade, supply & demand and other out-dated concepts.

 

YesWeKahn's picture

I wanna to see some margin calls. It is about time to punish the idiots.

Savvy's picture

Somehow I read that as "chaotically pyrocyclical carry trades"

falak pema's picture

I thought there was no carry trade on LTRO 2 and all the money was parked with ECB! As for LTRO 1.

CrashisOptimistic's picture

It would be amusing and pleasant to watch the entire year's silly advance evaporate in a few days this week.

TradingJoe's picture

Not so sure about this, options seem to be slow catching on!? Also contango seems to reak havoc also, VIX and related "products" don't really move much either! Still, I expect at least 5% to 10% before BTFD becomes en vogue again! Or, FEDsters bring out the RPGs :))!

SillySalesmanQuestion's picture

Calling the Plunge Protection Team...where are you? Oh, they're already busy...then send Robo and MDB, they'll do in a pinch.

sschu's picture

 

The world economy cannot deal with WTI at $110+ plus not many politicians will get reelected with gas near $5.00 / gal.  This continues to be the conundrum and paradox of the central bankers; they cannot bailout their buddies and prevent a deflationary collapse by printing free money without affecting the price of oil.  The excess liquidity is flowing precisely where the CBs do not want it to go, commodities.  So occasionally the heavy hand of the CBs needs to help investors understand the folly of not doing what is commanded. 

So the CBs have other approaches that they hope will work, but it is a fools errand.  The cheap/free money will flow to where the return is highest and the CBs have limited control over these flows.  Right now it is the price of oil, food, etc.     

Such is the moral hazard of trying to control the world, there are unintended (or some say intentional) consequences to the CBs actions.  A lot of unsuspecting people get seriously hurt and it cannot be sustained.  Forever at least.

sschu 

 

Vince Clortho's picture

Agree with most of what you post with the caveat that the short term appears to be the guiding force for the CBs, with longer term consequences to be dealt with later as they approach the Event Horizon.

sschu's picture

Your point is good.  We are looking at a Japanesque 20 year cycle of stagnation if we continue on this path.  

It is clear where this leads.  The very survival of Japan (Fuku, demographics, enormous public debt, negative trade flows) is in serious question right now.

Bennie etal's experiment in Keynesian voo-doo needs to end, and soon.  The longer we wait the worse the pain.

sschu

Dermasolarapaterraphatrima's picture

Australia RE Bubble Busting as we speaketh:

“…new homes sales in Australia crashed by a record monthly fall of 7.3% in January. The monthly fall in new sales was not a one off, and is part of a trend. Multi-unit sales have been smashed 25.1% if you compare sales over the last three months to the same period in 2011.”

 

It looks increasingly like Australian property could face the same dose of salts that has affected nearly every other property market in the world in the last few years.

 

From The Daily Reckoning web site

Shadowsil's picture

Checking all the numbers from MW and it just looks Red and dead everywhere...

 

They say it was a warm winter this year..

 

I think winter is coming now...

 

Stanwick's picture

I fine day I,picked to quit snorting glade air freshner

HyperLazy's picture

Aw yeah - this Tyler has got the good chart porn.

fap.fap.fap

RSloane's picture

The EU is in a recession - some of its nation components never climbed out of 2007/2008. Germany, the EU's supposed economic engine, had a contracted GDP last quarter. The entire region is saturated in negative growth. Unemployment is through the roof.  What the fuck did anyone expect?

Dr. Kananga's picture

But the Swiss are still making cheese, right?

I mean, fuck, it's not the end of the world yet.

/nudge ;-)

RSloane's picture

Cheese and chocolate~! All is right with zee Swiss.

Bastiat009's picture

Europe is fine, the euro is strong ... unlike gold, which is always terrible in time of crisis. It performs well when everything is fine and central banks ease but when the SHTF gold crashes faster than a bad currency.

graymnzrc's picture

It sure as hell dropped last time.

headless blogger's picture

It's odd that right after Netanyahu visits and does not seem to feel "satisfied" with enough "attack Iran" rhetoric, that suddenly the market starts diving. It is not enough that 3 major contenders for the Republican ticket, Sanitorium, Nuke, and Mitts, are all donning their knee pads for their visit to AIPAC today, or that Obama has stepped up his threats on the nation of Iran.

The guy won't be happy until the U.S. sends their kids in and bombs Iran into smitherenes.

 

Snakeeyes's picture

Economic slow down + ECB/FED Balance Sheets at almost $7 trillion!!!!!!!!

http://confoundedinterest.wordpress.com/2012/03/06/12123/