Oh, it’s just another eurocrash [updated] | FT Alphaville

Oh, it’s just another eurocrash [updated]

Lighting up the list of Europe’s biggest fallers at pixel time — banks:

Yes, you are reading this after Thursday’s eurozone summit. Italian spreads seem to be the cause but this was a violent move. Thoughts?

Update (1700 UK time) — Bruce Packard, banking analyst at Seymour Pierce, offers an interesting theory — low volumes:

Rather than “short covering” or “profit taking” (or vice versa), I think bank volumes are very thin. In which case these moves are just market makers creating volatility on the back of very low volumes, very little real buyers and sellers? The fact there is a test match on would support this hypothesis…

And it’s true, volume seems to have been very low for Dexia (which has closed down more than 8 per cent this evening) although on the other hand volumes appear to be less down for Italian banks, which also took heavy losses. But since low liquidity is driving underlying cash bond spreads, it wouldn’t be a surprise for related equities…