Credit market outperformance was reversed today as investors took profits ahead of the FED minutes. The FOMC statement this afternoon will be watched even more closely than usual given the expectations of further quantitative easing.The bulls are ready to repeat “The Grand Rally of 2009″.
“…and chairman Ben Bernanke is well-known for favouring of “unconventional” measures…”
Gavan Nolan
An expansion of the FED balance sheet was positive for risky assets during 2009 – when the US stock market gained more than 60% – and the rally in recent weeks suggests that investors are expecting a similar outcome in the coming months. But there are dissenting voices within the FOMC; Thomas Hoenig has been vocal in his opposition. However, he is outnumbered, and chairman Ben Bernanke is well-known for his “love of unconventional measures”.
Some investors are expecting a provisional asset purchase schedule to be announced dependent on the evolution of economic data. The Markit iTraxx Europe move below 100bp proved short-lived as the profit taking pushed it back above the key level, according to Markit Financial Information.
A tightening in Chinese monetary policy also dampened sentiment earlier in the day. China’s central bank said that it was raising the reserve requirement ratio of four major state-owned lenders and two privately-owned banks in an effort to rein in rampant lending.
The move served as a reminder of the different positions the US and China, not to mention the ongoing imbalances in the global economy.
Intel’s results after the close, mostley getting overshadowed by the FED minutes, will be keenly anticipated nonetheless.
“A relatively weak third-quarter is expected given the chip maker’s sales warning in August. But it will be the fourth-quarter outlook that investors will be watching out for,” Gavan Nolan, vice president at Markit Credit Research writes.
The final quarter of the year is traditionally the strongest for PC makers and the markets will be looking at the outlook as a gauge of demand.
“JP Morgan‘s results tomorrow could also be a catalyst for spread change, and the bank’s spreads were 7bp wider at 84bp at the time of writing,” Nolan notes, adding; “Fortune Brands and JC Penney continued to widen sharply after activist hedge fund Pershing Square revealed that it has bought large stakes in both firms. Pershing, owned by investor William Ackman, is known for pressurising companies into shareholder-friendly actions.”
- Markit iTraxx Europe 101bp (+3), Markit iTraxx Crossover 464bp (+8)
- Markit iTraxx SovX Western Europe 145.5bp (+3.5)
- Markit iTraxx Senior Financials 122bp (+3)
- Sovereigns – Greece 690bp (-4), Spain 210bp (+2), Portugal 398bp (+14), Italy 184bp (+5), Ireland 437bp (+15), Belgium 126bp (+4)
- BP 146bp (+5)
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UNIQUE MARKET ACTIVITY:
The ‘Unique Market Activity’ section lists stocks which were not active on Markit BOAT on the previous trading day.
Markit BOAT is a trade reporting platform which consolidates pan-European cash equity trade data from MTFs, Dark Pools and OTC transactions. The trading activity in this report took place on 11th October 2010 and was published by Markit BOAT on the same day. Trading activity reported with the ‘Market Condition’ flag is excluded from this report. Such trading activity is not relevant because the trade price and/or trading process does not reference or correlate with the then current market price.
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| Name | Sector | Volume | Turnover € |
|---|---|---|---|
| YOOX | Consumer Services | 382,200 | 2,938,218 |
| BROOKFIELD ASSET MANAGEMENT | Financials | 136,900 | 2,838,211 |
| PRINCESS PRIVATE EQUITY HOLDING | Financials | 465,483 | 2,327,415 |
| HANDLOWY | Financials | 34,413 | 761,543 |
| PBG | Industrials | 11,496 | 689,591 |
| AMPLIFON | Health Care | 187,103 | 657,895 |
| SVM UK ACTIVE FUND | Financials | 300,000 | 586,441 |
| PIAGGIO | Consumer Goods | 257,485 | 581,691 |
| POWSZECHNY ZAKLAD UBEZPIECZEN | Financials | 5,716 | 568,891 |
| GERRY WEBER INTERNATIONAL | Consumer Goods | 18,039 | 566,170 |
Top 10 ETF
| Name | Volume | Turnover € |
|---|---|---|
| DJ STOXX 600 OPTIMISED FOOD & BEVERAGE SOURCE ETF | 165,158 | 27,466,410 |
| DJ STOXX 600 OPTIMISED BASIC RESOURCES SOURCE ETF | 60,387 | 19,844,021 |
| DJ STOXX 600 OPTIMISED INSURANCE SOURCE ETF | 337,040 | 14,360,006 |
| DJ STOXX 600 OPTIMISED AUTOMOBILES & PARTS SOURCE ETF | 78,705 | 13,612,090 |
| DJ STOXX 600 OPTIMISED BANKS SOURCE ETF | 190,000 | 13,567,805 |
| ISHARES DAX DE | 176,000 | 10,266,080 |
| ETFS GRAIN DJ-UBSCISM | 2,300,140 | 10,024,089 |
| ISHARES DJ ST 600 TELECOM DE | 363,121 | 9,938,622 |
| DJ STOXX 600 OPTIMISED RETAIL SOURCE ETF | 68,351 | 8,181,744 |
| ISHARES PLC – ISHARES FTSE 100 | 1,246,762 | 8,084,082 |
Top 10 Trades
| Name | Sector | Volume | Turnover € |
|---|---|---|---|
| BBVA | Financials | 17,000,000 | 165,750,000 |
| BANCO SANTANDER | Financials | 10,000,000 | 93,699,999 |
| GLAXOSMITHKLINE | Health Care | 5,000,000 | 74,691,679 |
| EBRO PULEVA | Consumer Goods | 3,031,476 | 44,380,810 |
| SNAM RETE GAS | Oil & Gas | 10,000,000 | 37,499,061 |
| BSKYB | Consumer Services | 3,170,413 | 25,661,323 |
| ENI | Oil & Gas | 1,488,384 | 24,111,822 |
| TELEFONICA | Telecoms | 1,250,000 | 23,691,487 |
| RENAULT | Consumer Goods | 425,000 | 16,575,000 |
| BEKAERT | Industrials | 80,000 | 16,124,000 |
Major Movers
| Name | Sector | Volume | Volume (T-1) | % Change |
|---|---|---|---|---|
| PV CRYSTALOX SOLAR | Industrials | 11,398,939 | 55,654 | 20382% |
| ENTERPRISE INNS | Consumer Services | 9,716,859 | 482,223 | 1915% |
| BSKYB | Consumer Services | 7,079,030 | 509,495 | 1289% |
| ENI | Oil & Gas | 6,112,519 | 1,170,186 | 422% |
| UNICREDIT | Financials | 15,525,750 | 4,513,964 | 244% |
| ENEL | Utilities | 4,756,320 | 1,640,725 | 190% |
| ALCATEL LUCENT | Technology | 4,130,134 | 1,780,534 | 132% |
| BT | Telecoms | 12,542,976 | 6,625,224 | 89% |
| BP | Oil & Gas | 5,314,114 | 3,273,075 | 62% |
| BAE SYSTEMS | Industrials | 5,515,663 | 3,882,406 | 42% |
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