Where have all the bears gone?

Equity markets were generally buoyant in July as inflation data gently eased and fears of a recession faded. Investors are asking themselves whether yield-curve inversion has lost some predictive value. The potential shift in Bank of Japan policy created ripples through capital markets late in the month. It feels like we might have reached an interesting inflection point for equity markets. The question is, where do we go from here?

Despite realized volatility levels being range bound in the mid-teens, several Eurex derivatives saw strong volumes: TRFs on the EURO STOXX 50?, Banks, and FTSE 100 index all saw an increase in end-client activity. Several sector futures were highly active: Basic resources, Real estate, Utilities and Health care all saw double-digit percent volume upticks compared to the same month last year. In a continuing trend, the EURO STOXX 50? and KOSPI index options traded heavily again in July. However, the largest volume increases were reserved for the STOXX? Europe 600 and STOXX? Select Dividend 30 index options. As traders get to enjoy a summer break, I expect the market’s bullish sentiment will get tested and may result in a possible increase in volatility.

Eurex has several new product launch plans for Q3. Several are scheduled for September and will therefore be announced shortly. The most anticipated launch will be our daily expiring EURO STOXX 50? Index Options which will be available by the end of August. Here, liquidity and flow providers are ready to support this exciting new product segment.

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