European credit spreads continued to widen on Thursday, as appetite for risk sunk on the back of negative retail data from the US which dented hopes of a recovery in the economy.
Having moved as low as 740 basis points earlier this month, the Markit iTraxx Crossover index, which tracks the 45 most liquid names in the high yield bracket, continued to widen and was trading at 810bps points, 7bps up on Wednesday’s close.
The Markit iTraxx Europe, the index of the 125 most traded investment-grade names, started slowly but by mid-morning was trading 3bps wider than Wednesday’s close at 137bps.
Some analysts suggested the disappointing retail results had upset the pricing of riskier credits, which had been tracking hopes of a V-shape recovery.
In Japan, where earlier in the week the market had rallied as investors concluded that the bad news from the auto and banking sectors was drying up, positive sentiment was reversed as the gloomy news from the US took its toll on Japanese stocks.
The iTraxx Japan Series 11, the benchmark CDS index comprising the top 50 investment-grade names, widened to trade at 229.50bps, up from Wednesday’s close of 215bps.