While the ongoing slaughter in European bank credit, and mostly counterparty risk, is troubling, it is nothing new: we have been showing it for over a month, most recently on Friday in “European Bank Risk Soars To 3 Year Highs, US Risk Rising.”
And yet there is a new element to the latest European selloff, one which turned vicious just minutes after Europe opened for trading this morning with not just commercial banks (who are now all subject to bail-ins courtesy of the BRRD) being dumped with the Deutsche Bank water, but peripheral spreads and equity markets have all joined in.
Case in point: Spanish, Portuguese and Italian yields and spreads to Germany are blowing out…
… while the Athens stock market just dropped to the lowest level since 1990, as the Greek banking index just crashed over 21% to a new all time low.
Why the sudden and broad revulsion to everything European? Isn’t China’s devaluation and capital outflow enough worries for the shaky stock market? Or does China being offline for the next week demand that the market find something else to obsess over?
Perhaps the reason for the shift in market sentiment, which appears to have realized once more that Europe is not at all fixed…………………………………….