Photo: Chris Hondros/Getty Images
It’s an ugly day in the market, with equities tanking, and yields on Spanish and Italian debt jumping.Here’s Nomura with some colour on what’s got people so worked up:
Risk sentiment continued to weigh on the markets following an FT article that reported the ECB had rejected the Spanish government’s plan to recapitalise Bankia by indirectly tapping the ECB for cash as that would be in danger of breaching an EU ban on “monetary financing” or the central bank funding of governments. A weak Italian auction, a fall in euro area economic confidence and a softening of euro area M3 growth did not help either. The major surprise in latter was the fall in deposits placed by non-monetary financial intermediaries excluding insurance corporations and pension funds (-€50bn; previous: -€6bn). The fall in M3 growth is worrying because of the amount of liquidity injected in the system by the ECB, and this suggests to us that even if the Greece stays in the euro area the European sovereign crisis is far from over.
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