Equity Index Highlights - September 2018 edition

Market Briefing

As the summer ends and we move into September, a statistically poor month for equity markets, there are several themes which are already cause for concern amongst investors. Despite the buoyant US markets, which saw volume develop positively for our MSCI North America Futures, both Emerging and European markets experienced a negative performance in August. Eurex has observed a notable increase in our MSCI Emerging Markets Options volumes, likely linked to the on-going currency weakness in Turkey and Brazil. Europe saw renewed volatility as a result of Italian politics lurching back from a central to a more nationalist agenda, this resulted in an uptick for the VSTOXX® Options contracts as clients sought to take advantage of the spike in implied volatility around mid-August. A no-deal Brexit has again emerged as a theme, though the impact on equity markets is still an unknown and the question is to what extent investors have fully priced-in this event risk already.

Talk of factor rotation in US equity markets, away from momentum led technology stocks and towards value stocks, has ignited the debate as to whether this long equity bull run can be sustained for much longer. Eurex is well positioned to offer clients access to European factors via the iSTOXX® Factor Index futures suite, as well as via the MSCI USA Factor Futures. In this way, Eurex facilitates the execution of factor tilt strategies across both regions. There has been renewed interest in our EURO STOXX 50® Banks Futures and Options with strong volumes evident throughout August, a similar volume growth has been seen across a few other sector derivatives, notably: Automobiles & Parts, Basic Resources, Telecommunications, Industrial Goods & Services. STOXX® recently indicated its timeline to implement the planned changes to the Industry Classification Benchmark (ICB), these changes will have an impact on several of the STOXX® Supersector indices where the ICB is adopted.Market Briefing

It is worth noting that volumes have remained robust at Eurex over a traditionally quiet holiday month, this is consistent with investor concerns over escalating trade wars, which saw the autos heavy Mini-DAX® Futures remain in sharp focus. The volume trend for the EURO STOXX 50® Index Dividend Futures and Options has continued, the options saw order flow in both puts and calls that is suggestive of bullish views on index dividends. Interestingly, we have seen new activity in the EURO STOXX® Banks Index Dividend Futures, which recorded a large jump in trading volumes for August. This is an encouraging example of how Eurex is able to foster and transfer liquidity from successful benchmark contracts into developing related products to the benefit of our members and clients alike.

Zubin Ramdarshan, Head of Equity & Index Product Design, Eurex

Facts & figures