While not to the level of US sophistry, European equities enjoyed the day driven by further compression in Europe's VIX. The big winners were Spanish and Italian stocks (now up 2% on the week) as Europe's VIX drops to one-month lows. However, the correlated risk-on awesomeness did not flop over into anything but the high-beta nominal prices of equities. EURUSD slid all day (with a slight bump into the close); Italian and Spanish sovereigns bled wider all day (with a slight give back in the latter part); and corporate and financial credit stayed wide as stocks soared. With EUR weakness (remember the Fed/ECB framework [3]), we wonder if European equity strength is merely rotation from US to Europe? Or is it merely front-running the sell-the-news event at the ECB tomorrow?
Europe's VIX motivated equity's correlated bid early on today...
[4]
The equity vs debt and FX divergence...
[5]
and stocks and credit are diverging notably ahead of tomorrow's ECB meeting..
[6]