Italian PMI came in at a 33-month low. With many of the other releases also coming in lower than estimates.

Today the Spanish market IBEX 35 has opened approx 1% higher. This is somewhat of a relief rally after the index dropped by 2.5% yesterday.

Going forward, it is hard to see much good news out of Southern Europe. With austerity measures crushing the economies of Greece, Portugal, Italy and Spain to name a few.

Soon will be D-Day for the Spanish’s Cajas, when bond redemptions are due and these small banks require the capital to fulfil their obligations – this could make things interesting. One of the key worries is that LTRO monies which have flowed into these struggling European nations have been abundantly used by domestic banks to fund the purchase of their respective nation’s sovereign debt. Unfortunately, for Italy and Spain in particular, bond prices have plummeted back to near pre-LTRO levels and yields have shot up. This means that these banks will be potentially selling many investments at a loss, which were of course initially purchased using borrowed funds.

These losses are in addition to the other paper losses that will likely soon be realised once assets are marked to market.

This comes as the ceasefire deadline passes. Also reports of tanks raiding a Damascus neighbourhood.

MORE TO COME

Spanish and Italian Govt Bond yields spiked, with Spanish 10yr notes flirting with the ominous 6% mark, closing at 5.97%.

MORE TO COME