Vol Around the World – Europe and the U.S. Diverge

by Enis March 28, 2013 1:01 pm • Commentary

I mentioned in yesterday’s VIX Futures Snapshot that European asset volatility had increased in the past week, while U.S. volatility measures were still near the lows of the year.  Euro Stoxx 50 and DAX index volatility increased, as those indices were down 1.5-2% on the week.  Meanwhile, the SPX is up 0.5% on the week.  The spot divergence has existed for most of the past 2 months, but the vol divergence is relatively new.  Still, European index vol is not yet above its 52 week average, even with this week’s bounce.

Here is this week’s Vol Around the World snapshot, courtesy of Bloomberg:

Screen Shot 2013-03-28 at 12.08.21 PM
VCA screen 032813, Courtesy of Bloomberg

Currencies remain the sole asset class where implied volatility is around its 52 week average.  Perhaps most surprising, gold and copper are near 6 month lows, but their implied volatility readings are still near 52 week lows, a rare combination of lower spot price and lower volatility price.

EURUSD was down 1.5% on the week as well, a substantial move for a 9 vol asset.  In that sense, I would expect EURUSD implied vol to move to above average more quickly than European indices if their risk-off environment continues into April.