Italy, Spain, and Greece saw their stock markets rally today (with Greece dramatically so - though what exactly is 10% of nothing?). The rest of European stocks are underperforming as equities broadly deteriorate towards credit markets' already less sanguine shifts. In the last hour or so equities and credit did rally modestly into the EU close but investment grade credit remains near one-week wides as stocks remain range-bound. Spanish bonds (cracking over 7% yields) diverged significantly today as Italy managed to rally modestly close to close. Spain's 10Y spread to bunds has risen 90bps from its opening rally on Monday morning and over 55bps from Friday's close (and Italy +22bps on the week).; but Italian stocks are down 3% on the week and Spain up 1.85% on the week. It all makes sense if you blur your eyes and put your fingers in your ears. EURUSD managed to get back over 1.26 (as gold and silver dumped this morning) as we suspect we are seeing more repatriation flows (and TSYs tumbled this morning) but with Swiss 5Y rates almost 5bps negative, Europe remains teetering.
European stocks (blue) are reverting lower to credit's deterioration...
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as Spanish bond yields/spreads surged and diverged from Italy for a change...
but Spanish stocks remain notably outperformers relative to Italy...
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Charts: Bloomberg