When US equity futures, Treasury futures, and FX markets opened yesterday to a 'risk-on / reality-off' scenario, we made it clear that we suspected things would look very different by the European close. Sure enough, the markets in Europe (and US) have seen a dramatic shift in sentiment as the realization of the end-game here grows louder. It is evident that any strength, any rip, is to be sold. EURUSD rallied 1.2% at its best near the open last night but is ending 0.2% lower from Friday's close. Europe's broad equity market is closing modestly red after being up almost 2% at the open. Europe's financial credits led the equity market once again as senior spreads swung from a 20bps rally to a 10bps sell-off by the close. Italy was crushed after opened up over 4% to close down over 2.75% as Italian banks were halted all the way down. Spanish banks gave back all their gains (SAN was up almost 6% at the open and closed red). Investment grade credit notably underperformed and high-beta XOver swung from a 35bps tightening to close modestly wider. European sovereign bond spreads all opened notably tighter but were crushed by the close with Spain and Italy underperforming (+60bps and +50bps from their intraday low spreads respectively). Quite simply, Europe has swung from Spanish bailout fantasy to Europe's contagious panic reasserting - and that was after a weekend when Spain (and Spanish banks and every bullish trader out there) got everything they wanted. It would appear that the investing public has become better-educated at what is really going on in Europe and how these interim 'solutions' are all to be faded as Franco-German relations remain tense and Germany stoic. In liquidity/safety land, Swiss 2Y rates plunged 7bps to a new record -35.3bps.
European equities (dark blue) fell led by financials credit (blue and red) - this was your tell...
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European Sovereigns were dumped en masse, back near record high yields and CDS levels...
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As Spanish equities fell from up nearly 6% to down almost 1%...
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as even the 'saved' Spanish banks gave it all back (and were downgraded) as SAN dropped from up almost 10% to down 0.8%...
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and overall, Europe ended in a sea of red with DAX managing to hold very modest gains...
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and Swiss 2Y rates plunged to new record lows at -35.3bps...
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Charts: Bloomberg
Finally, we can only hope we are joking, but Zero Hedge has dibs on #SpankruptcyTM [14]