The market focus has switched from the seven sacrificial banks to those that just scraped through. Nobody is as yet fingering any particular one of these banks as dodgy but the market rates for 10 year sovereign bonds, widely held by such banks, are starting tell a story.
Bund rates have increased by 10 bps to 2.75%, remember a German bank was found wanting, Greek rates are now 11.6% an absolute increase and a blow out of their spread to Bunds and Spanish rates are now 4.52%. These are just precautionary moves in bond prices, so far!
Only the Far East markets have really had a chance to digest the stress test results. Reuters report, "On the surface, if anything, you have to take these tests with a pinch of salt," said Jonathan Cavenagh, currency strategist at Westpac, Sydney. "Sovereign debt problems remain, funding constraints for their banks are still there and these have the potential to weigh on the euro."
Economic news has been better than expected in Euroland and the UK leading to a recovery by the Euro and Sterling against the US dollar. Remember however budget cuts have yet to bite in both areas and the Club Med tourist season is in full swing. Mid September, things may look a lot different.