Since the European markets opened we have seen modest selling pressure, admittedly with little to no volume and thin liquidity wherever we look. The overnight ebullience in ES (the e-mini S&P futures contract) was not matched by other broad risk assets as CONTEXT (the risk asset proxy) rose only mildly and is now dropping (back below US day session closing levels). The main drivers of correlated derisking are rallies in TSYs (levels and 2s10s30s compression) and mild selling pressure in JPY crosses (AUDJPY most notably). Oil and Copper are finding ‘up’ is the path of least resistance for now and Gold and Silver are also pushing higher even as the USD has started to rollover a little in the last hour or so. A weak UK services print and Italian consumer confidence has Gilts rallying and (pivot security du jour) BTPs selling off, as the former 2Y hits a record low 0.299% and the latter breaks 500bps over Bunds (in 10Y). Asset correlations have been ebbing and flowing all week and while credit and equity have largely been in sync (as the former reracks off the latter), we note that Sub financials are under-performing so far and Main (investment grade) and XOver (high yield) have leaked wider from the pre-open in Europe.

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