We warned yesterday that European equity's surge was not supported by credit and that truism is massively obvious in today's market moves. European stocks soared (especially Italy and Spain) to new cycle highs as corporate and financial credit capped in its recent range - actually widening from its opening gap tights. European sovereigns also gapped tighter on the open and then proceeded to bleed wider all day long - most notably in Spain, Italy, and Portugal. Spanish 2Y jumped over 25bps from low to high yield today (and we suspect Spain bond yields have bottomed in teh short-term). EURUSD remains practically unch on the week - having dropped from over 1.30 earlier when Van Hollen let some truth out on the US fiscal cliff deal. Oil recovered from its spike lows yesterday (as did Silver). GGBs were very quiet and stable at around 35 but Weidmann's comments into the close on transfer unions and not rewarding failure did spook some weakness into risk-assets. Europe's VIX, meanwhile, closed at 16.49% - its lowest since June 2007!
Spanish 2Y yields jumped notably today...
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as did the rest of the sovereign complex after the initial snbap tighter at the open...
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But we note that Spanish 10Y bond yields have reached back to the levels they started the year, and saw a long-tailed candle today - which in the past has signaled a trend change in the short-term - especially off the trendline below...
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(h/t David H)
and while credit remained much more in line with sovereigns, equity markets just tripped over each other to buy and buy more...
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and across the broad group of equity indices in Europe, Italy is the crazy winner in the last 36 hours...
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With the EURUSD now unch on the week...
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and Commodities recovered aggressively from yesterday's weakness...
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Europe's stocks are catching up fast to US equity's YTD performance and both just passed above Gold for the year.
Charts: Bloomberg