Aside from Spain (-0.3%) and Greece (-11.8%), European equity markets are ending the week green - albeit marginally - as we can only assume the hopes and prayers of every banker are being discounted into the price of corporate liabilities (an 'event' will happen but don't worry as the ECB/Germany will cave). Corporate and financial credit markets also ended the week tighter - with financials the high beta players on the week, hugely outperforming on Tuesday but fading into today's close. Today was not a pretty end to the week in credit though as both sovereigns, corporates, financials, all peaked early in the day and pushed to near their lows by the close. Senior financial bond spreads actually closed wider on the day - at their wides - and Spanish sovereign bond spreads exploded over 35bps wider from earlier tights to end at theu widest since April 1995. Italian bond spreads also jumped 32bps wider from their morning tights but end the week -9bps and France gave back almost half its sovereign bond gains of the week today. EURUSD remains the story, breaking below 1.2500 for the first time since early July 2010 as it seems the FX markets remain much less sanguine of the endgame here than do equity markets (with sovereign credit getting closer to FX's world view and corporate credit closer to equities but fading today). Europe's VIX remains above 30% (though our VIX-V2X compression trade is performing well as US VIX elevates).
Athens Stock Exchange Index this week...-11.78%
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Credit markets - particularly financials (red below) - were weak today, giving back over half of the week's gains. Equities rallied into the close (blue) against the performance of every other asset class...
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but today was dismal for European sovereign spreads...
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leaving Spanish bond spreads at 17 year wides...
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and while we hear plenty of chatter on VIX, Europe's VIX equivalent remains above 30% - even after having a great week - though we note - the VIX-V2X compression trade we recommended is performing very well...
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Charts: Bloomberg