Feb 04, 2022
Eurex
Equity Index market briefing February 2022
What January effect? U.S. markets have endured their worst start since 2009; European markets were similarly hit. The drivers are well-publicized; tight labor markets, supply chain disruptions, food and energy price inflation all provide the catalyst for the Fed to signal higher rates throughout 2022 and general policy tightening. Consequently, equity markets are having a hard time swallowing this bitter pill. There are some regional differences with the ECB refusing to commit to rate hikes despite the market pricing some risks of this. Other divergences are observed at the factor and sector levels with value outperforming strongly and technology underperforming, begging the question of whether the big rotation out of momentum stocks has yet to begin after several false historical indicators.
These market dislocations naturally create hedging demand and also provide opportunity. Here, Eurex’s liquid order books have been heavily utilized. The Banks sector futures and options, KOSPI options, and EURO STOXX 50® weeklies have all seen strong January volume data. The broad STOXX® Europe 600 futures volumes continued with impressive growth, as did the traditional DAX®, Mini-DAX®, SMI®, and VSTOXX® benchmarks.
Eurex already commences the year by introducing new monthly expiries for EURO STOXX 50® index options, further migrating OTC activity into our transparent exchange-listed derivatives environment. Additional EUR-denominated ETRFs were added so that participants have the relevant scope of stocks from which to construct their Basket TRFs. A regular slot has been scheduled to add other single name derivatives later in Q1 and here, clients can expect to see some SEK-denominated dividend futures arrive. Lastly, next month, there are new index derivative launches in the pipeline to extend our MSCI suite. News on that is to be communicated shortly via our usual channels.
