If you are wondering why investors are focusing so much attention on the spreads between sovereign debt yields of Italy, and now France, take a look a the charts below.  In each chart, the blue line represents the price of French and Italian benchmark equity indices, while the red line shows the spread between each country’s 10-year sovereign debt yields and the yield on German 10-year debt.  For both France and Italy, their benchmark stock indices both went into a free-fall just as debt yields became unanchored from the yields on German debt.

Today, spreads have tightened by between 5% and 8% in both countries, and not surprisingly equities in both countries are higher.

Oil Now Solidly Above its 200-Day

While the S&P 500 has been stymied by its 200-day moving average recently, oil (West Texas) has made mince meat of it.  As shown below, oil had a bit of trouble with resistance at its 200-day last week, but this week it has broken solidly above it.  Now oil’s 200-day should act as some nice support as the commodity makes another run towards the $100 mark.  Just what the consumer needs heading into the holidays!

Brent – WTI Spread Drops to Lowest Level Since June

Is the debt crisis in Europe beginning to make its presence felt in the oil market?  A look at the spread between Brent and WTI crude oil suggests that the answer is yes.  Even though the price of WTI has recently been soaring, thanks to a lack of a meaningful rally in Brent North Sea crude, the spread between the prices of the two benchmark oil prices dropped to $15.30 today for its lowest close since mid-June.  It’s for this reason that the higher price of WTI crude hasn’t yet worked its way to the gas pump, and consumers can only hope that it stays that way.

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