by Doug Noland
Daily Reckoning
Another unsettled week for global markets. Japan’s Nikkei equities index rallied 6.5%. Italian bank stocks surged 10%, with the Europe STOXX 600 Bank Index up 8.1%. Germany’s DAX equities index rallied 4.5%, with Spanish stocks up 5.0% and Italian 4.3%. Hong Kong’s Hang Seng Financials index surged 5.9%. The EM market rally continued. U.S. bank stocks jumped 7.0%. A Friday evening Bloomberg headline: “Rough Week for Shorts as Banks Send S&P 500 to Four-Month High.”
Recalling back to 2008, U.S. financial stocks surged 10% in a single session. Reminiscent of 2008 market dynamics, global bonds aren’t much buying into the equities market “risk on.” Japanese 10-year (JGB) yields fell three bps (to negative 13bps), and German yields increased only four bps (to 13bps). Ten-year Treasury yields rose four bps, taking back only two-thirds of last week’s decline. European periphery spreads tightened only marginally.