While Monti claims there is no need for an emergency summit and Spain and Italy ban short-sellers (but not long-sellers yet), Europe's Dow-equivalent is down around 2.5%. Interestingly Italy and Spain 'bounced' off ugly lows intraday (which we are sure Monti/Rajoy are patting themselves on the back briefly) but France's CAC40 and Germany's DAX were sold hard - both down around 3% (as proxies as much as contagion-gatherers). More critically, equities are catching down to European credit markets. European financial credit is now notably wider than pre-Summit levels but it is the front-end of the Spanish and Italian sovereign yield curves that has been absolutely monkey-hammered in the last few days. Spain 2Y is now at 16 year highs in yield (biggest 1- and 2-day jumps in over two years) but all-time record wides in spread as we await for the ultimate death cross of inversion to signal the approaching endgame. EURUSD hovered around 1.2100 (down around 50 pips from Friday) and while oil prices slumped, Brent priced in EUR remains above its levels 2 months ago. Meanwhile, Swiss 2Y rates are at a new record low of -44.4bps, German 2Y same at -8bp, and Denmark remains -31bps - though we do note some of the other higher quality 2Ys leaking a little higher in yield such as Austria and France.
European stocks (blue) are catching down to European credit and financials are now worse than pre-summit as the reality of bail-ins and/or subordination hit home...
[6]
and Italian and Spanish financial credits have been just smashed wider...
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but it is the Spanish yield curve and its too big to save nature that is crushing hopes...
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and 2Y Spanish spreads are now at all-time record wides...
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and EURUSD weakness combined with oil strength has crushed the hopes of any savings on energy as Brent priced in EUR remains extremely high...
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and there is some differentiation occurring at the short-end of the high quality collateral spectrum...
[11]
Charts: Bloomberg