Wherever you looked today in Italy, shares were halted. From Saipem to Seat and From Banco Popolare to BMPS, individual stocks fell between 5% and 45% in some cases. Spain also fell alongside its incorrigible risk-on peripheral neighbor as dividend suspensions, outlook cuts, rating downgrades, and a growing concern about the banking system's legitimacy wear on sentiment. Italian sovereign risk was largely unchanged but as the US opened it started to bleed wider - but in general bonds ignored the stress in stocks. FX markets also were un-phased as EUR continued to test higher. CHF did, however, strengthen notably (against the USD, EUR, and mostly against the JPY - up 28% in the last six months!). The CHF strength did nothing for demand for Swiss rates though as they pushed higher to 10-month highs. The big problem though lies in credit. Just as in the US, credit markets in Europe are massively divergent from stocks' exuberance - and today's surge in Europe's VIX also echoes the disconnect we are seeing evolve in the US. Things are shifting...
Ugly day in Italian stocks...
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CHFJPY strength...wow...is this how the SNB is doing it?
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As Italy played catch-down to Spain on the week...
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but it is credit markets that are starting to show signs of stress...
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Charts: Bloomberg