"Contagion" is a word most Europeans have forgotten ever since the 2012 European Sovereign Debt Crisis that almost threatened to end the euro project. It was a dark time for the EU and Eurozone back then. However, if we judged the severity of a crisis by the size of corresponding market moves, last Friday's Brexit absolutely blows 2012 and even Lehman (2008) out of the water.
European banks just recorded their largest 2-day loss on record, dropping -23.13% since Thursday's close, or 8% more than the last biggest drawdown. If you're a trader, you'll appreciate just how enormous this move is, and how intense the selling really was for a matter as diversified and broad as the EuroStoxx 600 to collapse this much so quickly! Even if we assumed European banks were flat and not already in a bear market, it would have fallen into one 6 hours ago when trading started for Monday.
Also, when we price European financial stocks in USD instead of in EUR, they will be at all time lows, low ever than 2008's depths.
Contagion is real. So far, The Netherlands and France have floated talks on holding their own EU referendums, and we suspect if this trend were allowed to keep up, we'll be seeing the other member states the likes of Italy, Spain, Cyprus, Greece, and Portugal start to plan their own exits from the bloc...
Markets might already be starting to discount for this risk, although it may seem trivial for now.
European banks just recorded their largest 2-day loss on record, dropping -23.13% since Thursday's close, or 8% more than the last biggest drawdown. If you're a trader, you'll appreciate just how enormous this move is, and how intense the selling really was for a matter as diversified and broad as the EuroStoxx 600 to collapse this much so quickly! Even if we assumed European banks were flat and not already in a bear market, it would have fallen into one 6 hours ago when trading started for Monday.
Also, when we price European financial stocks in USD instead of in EUR, they will be at all time lows, low ever than 2008's depths.
Contagion is real. So far, The Netherlands and France have floated talks on holding their own EU referendums, and we suspect if this trend were allowed to keep up, we'll be seeing the other member states the likes of Italy, Spain, Cyprus, Greece, and Portugal start to plan their own exits from the bloc...
Markets might already be starting to discount for this risk, although it may seem trivial for now.
Attached Image (click to enlarge)
