Suffice to say European equities could have done without Monday’s Brexit drama.
Last Thursday, stocks across the pond logged their worst day since Brexit amid the global risk-off dump and as detailed pretty extensively here on Sunday evening, European assets are staring down the rather uncomfortable prospect of the ECB reiterating an end to APP on Thursday at a time when political tensions are running high and rising short-end rates in the U.S. are sapping demand for € credit.
To the extent all of that already made for a challenging environment, the Huawei situation and now, the prospect of a no-deal Brexit, is adding insult to injury.
European equities sank into the close as Theresa May said the government is now “stepping up” preparations for a no-deal scenario, comments which sent sterling tumbling further to a 21-month nadir.
The Stoxx 600 sank nearly 2% on the session thanks in no small part to May’s remarks. Here’s the index with the VStoxx (see if you can’t point to when she started talking):
This was the fourth down day in five for Europe and as noted above, it comes just one session removed from the worst one-day decline since the Brexit referendum.
Here’s the market map and as you can see, virtually nothing was spared.
And here’s the picture YTD:
Forgive me, but from where I’m sitting, it’s not clear that European shares are a bargain here despite the ongoing rout. Between Italy, Brexit, bank woes, the threat of auto tariffs and the ECB pulling the punch bowl, it’s hard to see what’s to like right now.
Draghi is going to need to pull out all his tricks on Thursday.