[credit provider=”Antonio Tajuelo via flickr” url=”http://www.flickr.com/photos/antoniotajuelo/4279327971/”]
Even on a day when markets are up across Europe, there are still signs of change.Remember, it used to be that when peripheral credit rallied, then peripheral equity outperformed core equity, and visa versa.
That’s been changing recently. As credit deterioration has been ongoing, we’ve seen French and German markets take some pretty hard lumps.
And we’re seeing the mirror image of that today. Spanish debt is rallying at both the short end and long end of the curve (at least at the moment), and yet its the DAX outperforming the IBEX (not wildly so, but enough).
The key point: Germany is becoming much more sensitive to peripheral credit swings. The core infection continues.