Europe's Dow-equivalent - the EuroStoxx 50 - closed today negative year-to-date. The divergence between the exuberance in the US and dysphoria in Europe reminds us of 2012 - when exactly the same thing happened. Of course, the fact that stocks are red should come as no surprise since credit markets have been markedly wider on the year for a week or two. Today started off on a bright spot (as there was no blood on the streets of Nicosia) which spurred some buying in European stocks - but into the close that faded quickly with Spain and Italy pushing back into the red (and the rest of the markets following suit). EURUSD surged all day but as Europe closed it retraced a little of the gains - unable to snag 1.2850 (but 100 pips off the lows). German bunds remain bid (2Y at -2.6bps vs Swiss at -0.02bps) as die neue safe haven remains. So Europe ends Q1 in the red; China ends Q1 in the red; and US credit is unchanged in Q1; but US stocks +11% - sustainable?
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as EURUSD slumps (with a small bounce today)... with it touching 4 month lows intrday...
and European stocks and bonds bounced a little but gave it all back into the close today...
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Leaving Spain and Italy notably lower on the year...
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and Italian bonds notably wider on the year...
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and European Banks are trading at more than six month lows...
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So, let's get this straight. The three pillars of US equity strength appear to be - European tail-risk is off the table (Draghi): well it appears that is not true given the blowouts in bank stocks, sovereign credit, and equity indices in general in Europe; Global growth renaissance: well that appears to be cleary untrue as Copper inventories surge in China, electricity production plunges, and their market collapses; and US earnings recovery: well yeah apart from ORCL, CAT etc... and the consistent 46 week of negative up vs down EPS revisions...
So what is it? I think we all know really...
Charts: Bloomberg