European sovereign bond spreads have not batted an eyelid during the recent Russia-Ukraine crisis... and why should they, Draghi will do "whatever it takes." Even HY credit in Europe is holding up - despite an ugly squeeze wider on Friday (chatter that positioning in very long credit). But with Europe's VIX above 20, the broad European stock index is now below pre-Putin levels. What is perhaps most stunning is that while investors have piled out of German, Swiss, and French stocks in the last few days, they have backed-up-the-truck in "new normal" safe-haven Portugal. The reason proferred by some - Portugal is further from Ukraine (and less dependent on Russia's gas) - which of course is the critical swing factor for an economy that remains crushed aside from trade with Germany.
Stocks are back below Putin levels...
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As investors have flushed their core German stock holdings and bid Portugal (and Italy) to the moon...
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Which just exacerbates the remarkable divergence among European stocks this year...
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We are sure somewhere this all makes sense...It would appear the 'safe-haven' seekers have forgotten that if Germany comes under pressure from Russian sanction retaliation then Europe is in trouble... but hey, why worry, just buy the worst...
Charts: Bloomberg