Is the downward trend still intact?

Equity markets continued trading in the negative channel established after the highs reached during the summer. The STOXX? 600 posted the weakest monthly performance since September last year. The outbreak of tension in the Middle East following the deadly Hamas terrorist attacks and subsequent response from the Israeli government has cast a dark shadow across the world as highly disturbing TV images were broadcast. Markets feel particularly fragile as major central banks have inflation control as their main target, reducing the capacity to switch to an accommodative stance should negative sentiment push the global economy into reverse. However, there seems to be a consensus that the series of rate increases that commenced last year reached a climax. A prolonged pause might represent the next phase as new macro data is observed closely in the Eurozone, UK and US.

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Given this backdrop, it is unsurprising that October volumes saw an uptick. The segments impacted included VSTOXX? Futures and Options, where clients position for short-term volatility spikes via the futures, contrasted by bearish bets via calls and puts. STOXX? Europe 600 Futures saw increased activity alongside other benchmark index options on the EURO?STOXX 50?, Banks sector and DAX. The Dividend derivatives segment has grown substantially, with the EURO STOXX? 50 Index Dividend Futures reaching a healthy ADV of 29k and 15k for the respective options. With markets faltering and testing key technical support levels, the iShares Physical Gold ETN Options saw a fourfold increase in volume compared to the same month last year.

Eurex successfully launched its Bitcoin Options and we are working towards building a good liquidity picture for that new segment. As I write this commentary, the listing of 73x UK Equity Total Return Futures went live, adding to the attractiveness of our overall Basket TRF offering. Finally, following the success of our Daily EURO STOXX 50? Index Options, we will shortly extend that segment with highly anticipated Daily Options on the DAX. The general level of economic and geopolitical uncertainty that has now arrived in Q4 puts a ‘Christmas rally’ into doubt. This will make for an interesting trading environment and potentially choppy conditions ahead.