European bank stocks are officially in bear market territory, now down over 22% from their highs with today’s drop closing the index at seven month lows. Financial stocks have played catch down to credit’s early warning weakness but still have more room to run. The correlation between financials and sovereigns has been notably broken down in the last few weeks - as it seems an external funding source has saved European sovereign debt (perhaps one that just wants to get away from its vicious cycle-like devaluation and diversify into anything non-JPY-denominated). On the day, Portugal blew wider at the open (+22bps) only to be magnificently bid back to unchanged by the invisible hand. Spain and Italy drifted slightly tighter on the day. Stocks were similarly low range today. Swiss 2Y closed at 3-month lows as EURUSD retraced back from its highs to close practically unchanged from Friday at 1.3000.
Bank stocks are -22% from their highs in Late January. Notice the stability in European sovereign risk (the blue line is a GDP-weighted average of nation spreads)… and its ignorance of the collapse in recent weeks…
The
Argentine Government has made it its policy to overvalue the
Argentinean Peso (to hide the fact that people are buying dollars and
smuggling them out of the country in any way they can as a result of the
brain-dead policies they’ve been pursuing for about a decade now). Of
course this has led to a “black market” rising where the USD is indeed
much higher than the “official rate”. The free market USD is often
referred to as Blue Dollar, and is about 60-70% higher than the
Government-suppressed “market”.
Billionaire
investor George Soros said China has a “couple of years” to control
risks from nontraditional financing whose expansion has parallels with
the cause of the global financial crisis.