Risk Asset Close and Take on the Spanish BB

I was interested in how the risk asset layout would close, especially high yield credit. There's not much point in positing all of the charts as there's not much to see.

Commodities were in line with the SPX almost all day, they actually tracked the SPX much closer than the EUR or $USD as the Euro managed to close close to its 11:30 a.m. intraday lows, while commodities and the SPX closed at their lows.  Since the market outperformed the Euro substantially Friday and the market underperformed the Euro substantially today, it puts the two pretty close to reversion to the mean with the Euro just a tad lower since Friday's action.

High Yield Corporate credit which had held up better than High Yield Credit earlier in the day, saw downside action in the afternoon closing at it's lows for a -.58% loss on the day, both HY Crop Credit and the SPX have also reverted to their mean, meaning they are roughly in the same place.

High Yield Credit didn't improve at all, which is a bit scary, but it's also 1 day and it's impossible to know how the JPM unwind of the whale trade is effecting credit, but we can't deal in speculation, HY Credit was ugly today taking out the 6/7 lows while the SPX remains just above them.

Yields closed off their lows of the day, but also closed an hour earlier than the SPX.

Financials were hit harder on the day, but didn't have the same downside momentum as the SPX over the last two hours of the day. Energy gave up its relative burst of momentum vs the SPX from 11:30-1 p.m. and closed just a little worse than the SPX at -1.36% vs. -1.27 for the SPX. Tech also gave up its better relative performance seen in the morning and closed down -1.45%; APPL's last hour or so of trade had a direct impact on Tech as you would imagine (AAPL down -1.52%)

The Euro gave up a lot today...

 All of the opening gap gains were lost and then some.

The major resistance area which the Euro gapped above was lost, the short term uptrend (green) was just barely broken, while it remains above the May 1 downtrend (blue).

All in all, a schizophrenic market action from over-joyed to manic. I was happy to see the Euro up last night, but the reality of the incompetence of the EU Finance Ministers had me concerned with the lack of details. I suppose I'm a little surprised as well at how fast the details emerged, but to be fair that sword cuts both ways. The EU tried today to stick save some of the damage done in a not so well thought out plan.

I certainly have no illusions about the course of the EU and how things will end, but in the interim, right now they are brainstorming to find a way to undo some of the mess their Spanish Banking Bailout plan caused, THEY HAVE TO, otherwise the Spanish banking bailout will quickly turn in to a Spanish sovereign bailout. This is the law of the EU's unintended consequences. The consensus was Spanish banks may need $60-$80 bn Euros, the Fin Mins thought they'd blow the market away with their $100 bn Euro Bazooka, they apparently just didn't look at the details and in the process went from creating what they thought would be well received by the market to a bigger mess that could precipitate not only a Spanish Banking Bailout, but a sovereign one as the ESM senior debt scheme sends sovereign debt creditors heading for the exits en masse, which means Spain could be locked completely out of the debt markets and then the bailout will be much, much bigger.


So long story short, look for more announcements from the EU trying to remedy this mess, they actually took a bad situation and made it a lot worse, PAR FOR THE COURSE!