Markets despise political instability.
Portugal’s main stock index — the PSI 20 — is down 5.4% today, barely holding the November lows.
Portugal PSI daily
The bond market is even more dramatic. Ten-year yields are 110 basis points higher today and flirting with 8%.
What’s truly impressive is that the euro has shrugged off the concerns. After falling to 1.2923 early in European trading, it’s bounced to 1.2960.
Portugal looks like it’s headed to the ballot box and that points to a lower euro but today’s resilience is impressive. If it continues (and that’s a big IF), the euro bears will be disappointed.
