Source: Bloomberg

The plot of the Euro Stoxx 600 Index vs the euro during the past 48 hours says it all. Or does it?

The worst performers in the broad European index were NOT the currency-sensitive exporters, but the near-equivalents to bonds: real estate, utilities, telecommunications and so forth. Tech was at the bottom of the pile, to be sure, but that’s not a European but rather a global phenomenon.

What the European market is responding to, it seems, is not the problem of currency competitiveness as the euro rises, but rather the substitution of bond-like equities for bonds as interest rates on the safest European debt turned negative. If bond yields normalize there will be a lot less of a reason to hold European real estate investment trusts or utilities.