Where have all the bears gone?

February marked a divergence between equity and bond markets. Broad index benchmarks for Asia, Europe and the US rallied during the month, temporarily reducing the demand for derivatives hedging. From listening to active traders at the recent Derivatives Forum Frankfurt, there seems to be one single draw of focus at the moment: Nvidia options. All good and well, but Europe has, of course, their own world-beating stocks. And thanks to the Goldman Sachs research team, this thematic basket has its own catchy name: “The GRANOLAs” - GSK, Roche, ASML, Nestlé, Novartis, Novo Nordisk, L'Oréal, LVMH, AstraZeneca, SAP and Sanofi. And, partially thanks to these Granolas, Eurex recently enjoyed a volume bump across the single-name equity and ETF options segments.

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Despite the lower realized volatility across equities, several Eurex products showed strong volume growth compared to the same period last year: STOXX? Europe 600 Futures & Options, KOSPI 200 futures, Banks sector TRF and dividend futures and the MSCI World Index Futures. Interestingly, the broader STOXX? Europe 600 sectors, including the enlarged regional Eurozone, Nordics, UK and Swiss components, saw a renaissance recently, with the Banks, Utilities and Real Estate futures enjoying higher than usual activity. The EURO STOXX 50? dividend options saw a leap in volumes on the back of high expected dividend point levels, reaching an ADV of 24k.

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With AI chipmakers driving equity performance at a phenomenal pace, Eurex responded with the announcement of our new STOXX? Semiconductor 30 Index Futures, which go live shortly. At the same time, a suite of three new FTSE EPRA NAREIT index futures start trading, also addressing the demand for hedging as the storyline of Commercial Real Estate (CRE) debt refinancing once again takes up newspaper headline space. Members can also look forward to the exciting introduction of MSCI Index TRFs, covering World, EM and EAFE regions, supported by excellent liquidity provision from our tier-one bank members. I sign this monthly commentary off by asking, “Where have all the bears gone, and are stock markets awash with complacency?” Current central bank policy is gripped by the fight against inflation, leaving the market vulnerable to new shocks. An old trading desk adage comes to mind: “Hedge when you can…not when you have to!”