It’s an interesting morning, given the Portuguese bank default issues, and the carryover selling it is provoking in “PIIGS” sovereign bonds. This is the first time we’ve seen such action since Mario Draghi made his infamous “whatever it takes” promise to basically backstop every government and government bond in Europe.
What I find interesting is the charts of several European bank stocks.
First is a chart of Deutsche Bank’s U.S. ADRs (DB). You can see they topped out at the beginning of the year and have been plummeting every since, despite a continued rally in European government bonds and the euro (and global stocks overall).
You can also see in the second chart of the EUR currency futures that they started to top out in May, and have been treading water the past several days.
I’m wondering if the DB chart isn’t pointing the way, so to speak, for the euro. In other words, could the euro follow DB (and other European/U.K. banks that trade in the U.S. like HSBC, CS, UBS, BCS etc.) lower — and potentially much lower? But if the currency were to follow the price of euro bank shares, we could fall all the way down to the 1.27-1.28 level on euro (vs. about 1.36 now). We shall see!
I will have more on the crisis in my afternoon Money and Markets column later today.
Until next time,