Bond yields of Italy, Spain, and Belgium continue their relentless march higher. Yields are at record or near-record highs in all three countries relative to Germany.

Italy 10 Year Government Bonds

Spain 10 Year Government Bonds

Belgium 10 Year Government Bonds

Italy debt yields nearly touched Spain debt yields at the highs near 6.41%

Sarkozy Meets With Merkel, Zapatero

Bloomberg reports Sarkozy to Discuss Debt Crisis With Merkel, Zapatero After Markets Roiled

French President Nicolas Sarkozy and German Chancellor Angela Merkel will discuss the euro region’s debt crisis today after concerns that it will spread to Italy and Spain helped trigger a global market rout.

Sarkozy will also speak with Spanish Prime Minister Jose Luis Rodriguez Zapatero, according to an official at the French president’s office in Paris. Sarkozy spoke with European Central Bank President Jean-Claude Trichet yesterday and the previous day, said the person, who cannot be identified under government policy. The official wouldn’t give details on the timing of the calls.

European officials are now trying to prod leaders into announcing new measures such as increasing the size of the bailout fund to put a firewall around Italy and Spain, the euro region’s third and fourth-largest economies. Parliaments may also be pushed to speed up the ratification of new measures designed to empower it to buy government bonds.

The meeting was useless. There is nothing they can do or say.

European Equities Rout

click on chart for sharper image

Many of the numbers are fluctuating wildly. Difficult to predict the close.
Eyes are now on the US jobs Report.

Don’t Worry, It’s Orderly

Bloomberg reports Stock Plunge Erasing $780 Billion Seen as ‘Orderly’ as Brokers Keep Bids

The rout that erased about $780 billion from U.S. share values yesterday reflected orderly selling by institutional investors, unlike the crash of May 2010, traders said.

The Standard & Poor’s 500 Index fell 4.8 percent to an eight-month low, the biggest drop since February 2009. The tumble that became known by traders as the flash crash on May 6, 2010, wiped out $862 billion in less than 20 minutes and briefly sent the S&P; 500 down 8.6 percent.

While 497 stocks in the S&P; 500 fell yesterday, declines were smaller than in the 2010 crash. So-called circuit breakers that halt trading when shares rise or fall 10 percent in five minutes were triggered once yesterday. The swings on May 6 were so wide that the curbs would have been set off more than 600 times had they existed, according to data compiled by Ana Avramovic, a New York-based analyst at Credit Suisse Group AG.

“Liquidity is fine,” Dave Lutz, head of ETF trading and strategy at Stifel Nicolaus & Co. in Baltimore, wrote in an e- mail. “I have not heard any chatter of brokers pulling in bids, and I don’t see any ‘panic’-type selling from our clients. The market is operating just fine — this is a bad sell-off, but very orderly.”

Please remember the first rule of panic: If you are going to panic, do so before everyone else does.

Mike “Mish” Shedlock
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