CNBC is convinced - this is just profit-taking, and think about where we have come from? We prefer to base our positioning on expectations of the future as opposed to extrapolations of the past. If only we could ignore the last two days, Europe would look awesome! Every asset class is indeed up for the week: stocks, EURUSD, sovereign bonds, and corporate and financial credit. However, the last 36 hours or so has seen almost half of the week's gain s chaffed away by them pesky profit-takers (apparently). EURUSD is 100pips off Wednesday's highs; Bloomberg's BE500 (broad equity index) is around 2% off Thursday's highs; IG and Financial credit spreads are around 5-10% riskier from Wednesday's tights; Spain's equity market is 3.5% lower than its peak on Wednesday and Italy down 2.5% from its mid-week highs. Sovereigns have remained relatively resilient - giving back only a few bps of their gains this week (Spain/Italy -40bps on the week). But apart from all that - Europe's doing great apparently. Spot the odd chart out (and which do you trust?)
EURUSD...
[5]
European credit spreads...
[6]
European stocks...
[7]
and the ever-reliable European sovereign bond market..
[8]
Which one of these charts is the odd one out?
Which is directly monitored and used as a signal for markets around the world?
Which is the metric by which the ECB and Europe's leaders judge the efficacy of their performance?
and which is the market that is increasingly dominated by domestic on-the-edge financials?
HHmmmm...
Charts: Bloomberg