UBS has started European trading off on the wrong track. 'Astonishingly', coming clean to a USD2bn loss on the back of unauthorized trading. No details on whether this was selling Greek credit protection or buying Portuguese bonds (for the yield) but the Bloomberg headlines, UBS equity price crash, and the ES reaction are clear:
*UBS SAYS TRADING LOSS OF $2 BLN :UBSN VX
*UBS CITES UNAUTHORIZED TRADE IN INVESTMENT BANK :UBSN VX
*UBS SAYS MAY MAKE LOSS IN THIRD QUARTER BECAUSE OF TRADE
*UBS SAYS NO CLIENT POSITIONS AFFECTED :UBSN VX
*UBS SAYS MATTER IS STILL BEING INVESTIGATED :UBSN VX
*UBS DROPS 9.2% IN ZURICH TRADING :UBSN VX (now 9.6%!!)
...and ES, after ramping back up to VWAP out of nowhere, ripped back below it - almost 3 standard deviations in an instant. FX seems relatively stable (though Swissy is strengthening a little vs the USD and jumped 20 pips in EURCHF's channel) but oil is dropping relatively quickly. Credit spreads are not budging much - though off their earlier tights. Gold and Silver seem unaffected for now.
Senior Financials opened 8.5bps tighter but quickly snapped back around 5bps - trading 285bps now.