European vols are significantly offered this morning as equity markets advance. In SX5E, skews are more or less unch today as the vol surface was shifting uniformly across strikes. The recent up move in SX5E skews over the last month was primarily driven by the downside vols. Indeed, downside skews are trading around the high level observed in Oct11 while the upsides skews are drastically lower vs. Oct levels. Very slow start to trading as 50k contracts cross in the first hour with no large flows. There was a Mar 2500/2300 1x4 PR that traded in the middle.

SX5E 3m implied correl accelerate on the downside, breaking through the lower boundary of a range highlighted over the last month and reaching a new seven-month low. The daily change can be explained by an increase in single stocks vols (10bps in Jun12) while the SX5E vols remain offered (-20bps for Jun12). Note that SX5E/UKX and SX5E/SMI 3m implied correl spread are both trading lower today while the SX5E/DAX 3m implied correl spread rebound after slumping over the past two weeks.

SX5E ATMF Fixed Strike Vol Change
Future Ref: 2531
Mar12 -0.5v [18.8]
Apr12 -0.3v [21.8]
May12 -0.3v [22.6]
Jun12 -0.2v [23.3]
Sep12 -0.3v [24.2]
Dec12 -0.2v [24.8]