Equity Index market briefing February 2023

It looks like Main Street and Wall Street might be diverging again. Against a backdrop of a wave of layoffs across several US tech giants, global equity markets enjoyed a pronounced positive January effect. Furthermore, the long-awaited tilt back towards European equity markets might be playing out as investors consider a shift away from US stocks.

Compared to the same period last year, volumes at Eurex recorded positive growth for the benchmark index products, notably across our TRF and index Dividend futures segments. This is indicative of structured product issuance, creating the demand to recycle forward exposure. The EURO STOXX 50®, Banks Sector and FTSE 100 index TRFs benefitted from high activity. The same is true for the respective index dividend futures, where the STOXX® Select 30 saw a good level of interest. As asset allocation got underway, the MSCI derivatives suite had specifically robust volumes for the EM Asia, EM EMEA, and China futures. The options volume growth, by contrast, was dominated by shorted-dated EURO STOXX 50® weekly and month-end expirations. This trend towards shorter-dated maturities trading, as evidenced in the US options markets, is one of the main drivers behind our upcoming NextGenETD project rollout.

With the sentiment in markets finely balanced between bulls and bears, I detect a shift away from the macro picture and Fed interest rate decisions being the sole focus towards individual company earnings driving investments. Naturally, such an environment supports hedging via Eurex’s liquid derivatives markets. Members can also look forward to a schedule of complementary new product launches, with the first exciting news to follow shortly this quarter.