The divergence between credit markets and equities accelerated today in Europe (and the US) as Senior and Subordinated financial credit spreads have increased dramatically in the last week. While risk has risen over 25% in financials, European stocks have gone sideways since the NFP print. The Subordinated financials spread has risen the most (in percentage terms) over the last 4 days since Nov2010 - and of course the broad equity markets are flat. It would seem that every trader and their mom is selling European financials and buying AAPL.
[7]
Bank stocks in Europe are starting to crack a little but there remains a gaping divide between equity and credit perceptions of risk.
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The largest 4-day jump in risk for subordinated financials credit in 14 months!
EURUSD is back under 1.31, US credit has retraced to pre-Samaras levels, Treasury yields are at their lows of the day, European sovereigns are all leaking wider (+19-20bps in Spain and Italy) and 7-9bps in the rest. Gold and Silver are inching higher (ignoring USD strength for now) as Copper sldies and Oil outperforms.
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It seems that as we tongue-in-cheek noted above, that investors are indeed selling Sub financials and buying AAPL...risk on? or not?
Chart: Bloomberg