Keeping it simple, Europe was a sloppy mess today. In an almost perfect copy of last week's sovereign, corporate, and financial credit market movements, today saw all of these assets plunge back near post-Non-Farm-Payroll lows. Equity markets, which had miraculously managed to regain those pre-NFP levels this morning after the Spanish auction knee-jerk, rapidly retraced and aside from some stick-save efforts from US markets and Lagarde, keeps the chaos-ball rolling with yet another multiple-sigma flip-flop. Ugly all around as it seems the reality check we discussed on the Spanish auction overnight was better received than the spin the Euro-Elite tried to put on it as we reinforce our view of the instability as the LTRO Stigma widens further to post LTRO1 wides as 10Y Spain approaches 6% yield and 425bps spread and Italian CDS over 440bps as 10Y yields break back above 5.5%.
European equities finally started to revert back to credit's reality once again as we note the rollercoaster ride that European credit markets have had in the last two weeks - interesting that we saw higher highs in stocks and lower highs in credit - we have a hunch which will be right this time...
[9]
In the same sense of deja vu, European sovereigns have oscillated this week in an almost perfect copy of last week ending back near their worst levels of the last two weeks (most specifically pivot securities in Italy and Spain). So, rally on a successful bill-auction (which is ridiculous anyway), then stabilize, then flush out short-term bears and then sell-off hard - oh well...
[10]
Yep, all fixed...
[11]
Fool me once, shame on you; fool me twice and I must be a long-only equity manager...
Charts: Bloomberg