Egan Jones Jars Market Out Of Rumor Hypnosis

While European, US, and commodity markets (ex-Spain) were enjoying the hope/hype of ECB rumors and QE chatter, Egan Jones just burst the bubble, back to reality. Within minutes of their downgrade of Spain, EURUSD was plunging faster than Facebook and along with that cornerstone of correlated risk markets, gold, silver, oil, copper, and US equities had smashed lower.

EURUSD was not the headline hit BBG (10 minutes after we posted it here)...


and commodities reacted...


Before all of this reality-checking, our European EOD was thus:

ECB Rumor Pushes Europe Ex-Spain Higher

In the same way that Mrs. Lincoln was unable to enjoy the play, we fear Draghi, Barroso, and Rajoy did not enjoy today's broadly green close in the European markets because of the slow-motion train-wreck that is Spain. The Euro-Stoxx is up 0.6% with the majority of European equity markets up around 1% but IBEX dropped over 2.3% further, Spanish banks plunged dramatically (thanks to Bankia's restatement throwing doubts over pretty much anything not bnailed down in their assets), Spanish sovereign bond spreads leakeds wider and Spanish sovereign CDS pushed to new record wides. Credit and equity markets gave a little back into the close but generally warbled in a narrow range - gapping up at the open.

What's maybe most worrying is that Italian bond spreads started to underperform Spain today - adding 10bps from their tights while Spain only added 4bps