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Soaring Credit Risk May Be Canary in Coal Mine for European Assets

  • Risk in credit market jumps on ECB as stock volatility muted
  • Money flows out of high-yield funds and into equity ones

Surging risk in the European credit market is signaling tough times ahead, clashing with a calmer scene in equities.

Measures of risk have soared for both investment-grade and high-yield borrowers after the European Central Bank’s unexpectedly hawkish tilt last week, even as a gauge of euro-area stock volatility has stayed below earlier peaks.