As US equity markets slide notably from overnight highs on the back of JPY carry unwinds, the USD weakness is the EUR's gain and the EURUSD pair pushing up towards 2 month highs near 1.3400. As the pool of global liquidity sloshes away (briefly) from Japan and the US, the dash-for-trash of what is working drives it into the highest-beta European assets. Banks and insurers rallied on the day across Europe. The best 4 equity markets across the EU were Greece (+2.5%), Portugal, Italy, and Spain with UK unch (as investors remain undecided on Carney's new deal) and all this amid a disappointing German data print. Spanish and Italian bond spreads compressed (of course) and notably US Treasuries are outperforming Bunds by around 4bps on the day.
EURUSD at 2-month highs, near 6-month highs...
[10]
and as that flow repatriates so the riskiest assets surge...
[11]
not an unusual pattern...the disconnect in April/May was when the BoJ started its idiocy - now we are back to the old new normal of strong EUR inflows means rising EU Stocks...
[12]
and where else better to put your money than 10Y Greek government bonds... sure they have 65% youth unemployment, sure there is no guarantee they will get a penny more from EU post-Merkel's re-election... but in the meantime you earn 9.6%... at 2 month highs...
[13]
Charts: Bloomberg