While bank stocks have been battered, it is the sector’s bonds and their spreads over government debt, that could provide early clues of an upturn. “The best news is that non-financial high-grade corporate debt has been behaving a lot better, but financial sector debt needs to be better bid,” said John Haynes, strategist at Rensburg Sheppard in London. He said a directional change in the iBoxx financial index, a benchmark for bonds from financial companies, was crucial. European financial bond prices have fallen almost 17% on average this year, the iBoxx financials index shows, suggesting investors are giving the sector a wide berth. Haynes said he was also watching the Platinum-to-Gold ratio. Platinum has a variety of industrial uses, notably in cars, while Gold is boosted by its safe-haven allure. The ratio of the two metals, in effect a ratio of economic growth expectations to investor fear, has moved decisively in the direction of fear. Platinum prices were double the level of gold in February last year, but now the ratio is close to 1 to 1.”You look at everything and try and work as you used to, said Fortis’ Gijsels. “But should have an open mind and understand that market internals have changed.”
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