European credit markets widened Thursday, reversing some of the outperformance seen this week. Profit taking no doubt contributed to the widening given the spread compression over the previous two days. Investors are still fixated on quantitative easing, and gold reached another record high of $1364 an oune.
“The jobless claims data failed to boost the US markets, possibly due to QE hopes being dampened slightly.”
News that the Vietnamese central bank is considering lifting its ban on gold imports probably helped the price rise. The economic data has been mixed this week, with a better than expected ISM report offset by a disappointing ADP employment survey. Either way, the markets appear to be convinced that QE is inevitable in the months ahead, vice president Gavan Nolan at Markit Credit Reseach writes in his daily alert.
Today’s better than expected weekly initial jobless claims may have given them pause for thought, and gold retreated sharply in the afternoon.
The claims figures aren’t relevant to Friday’s September non-farm payrolls but still acted as a positive catalyst for European markets, Nolan points out.
“The two central bank rate setting meetings were something of an irrelevance, as expected by most,” he continues.
The Bank of England kept rates on hold and maintained the level of QE at £200 billion.
“It will be interesting to see from the minutes later this month whether MPC member Adam Posen voted in favour of additional QE,” Nolan adds.
The ECB also kept rates on hold and Trichet’s press conference offered the usual platitudes.
Sovereign spreads were little changed Thursday, arresting their underperformance this week.
Ireland continued to attract interest after the National Treasury Management Agency issued a statement confirming that only unlisted institutions that are 100% under state control, i.e. Anglo Irish and Irish Nationwide, will see subordinated bondholders forced to share the burden of bailout.
The government also reiterated that it has “no intention” of imposing losses on senior bondholders.
“AIB, which is under government control but it is to retain its listing, won’t be subject to subordinated burden sharing. Irish bank CDS spreads, never the most liquid, saw little movement on the news.”
The jobless claims data failed to boost the US markets, possibly due to QE hopes being dampened slightly.
US same-store sales gave another positive signal on the economy. Luxury retailer Nordstrom posted a 7.5% increase in sales for September, while Limited Brands also beat expectations with a 12% rise.
- Markit iTraxxEurope 103bp (+1.5), Markit iTraxx Crossover 475bp (0)
- Markit iTraxx SovX Western Europe 151.5bp (-1)
- Markit iTraxx Senior Financials 129bp (+2)
- Sovereigns – Greece 745bp (0), Spain 228bp (0), Portugal 410bp (+5), Italy 193bp (0), Ireland 440bp (-3), Belgium 129bp (+2)
- BP 146bp (+8)
Equity Trading Highlights
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 7th 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.
Unique Market Activity
The “Unique Market Activity” section lists stocks which were not active on Markit BOAT on the previous trading day.
|THE VITEC GROUP||Industrials||150,303||861,186|
|ING BANK SLASKI||Financials||3,403||734,340|
|ERG||Oil & Gas||51,559||498,542|
|SVM UK ACTIVE FUND||Financials||250,000||488,616|
|POLSKA GRUPA ENERGETYCZNA||Utilities||74,429||405,159|
Top 10 ETF
|DJ STOXX 600 OPTIMISED AUTOMOBILES & PARTS SOURCE ETF||229,512||39,078,059|
|DB X-TRACKERS – MSCI ASIA AC ASIA EX JAPAN TRN INDEX ETF||1,150,000||26,769,239|
|UBS – ETF MSCI EUROPE I||534||24,459,870|
|DJ STOXX 600 OPTIMISED BANKS SOURCE ETF||269,449||19,394,350|
|ETFS WTI OIL 2MTH OIL SECURITIES||500,000||18,278,597|
|DJ STOXX 600 OPTIMISED OIL & GAS SOURCE ETF||138,000||18,272,299|
|DJ STOXX 600 OPTIMISED BASIC RESOURCES SOURCE ETF||49,986||16,275,517|
|DB X TRACKERS – DAX ETF||236,310||14,804,627|
|ISHARES IBOXX LSC1.5-10.5 DE||120,000||13,195,800|
|MSCI RUSSIA 25% CAPPED INDEX ETF||528,868||11,548,354|
Top 10 Trades
|SNAM RETE GAS||Oil & Gas||13,000,000||48,457,500|
|RIO TINTO||Basic Materials||1,000,000||44,377,990|
|Name||Sector||Volume||Volume (T-1)||% Change|
|RSA INSURANCE GROUP||Financials||9,049,772||1,771,695||411%|
|DSG INTERNATIONAL||Consumer Services||13,189,099||3,320,540||297%|
- Bank of England holds interest rates at 0.5pc, maintains QE (telegraph.co.uk)
- Interest Rate Held At Historic 0.5% Low (news.sky.com)
- Time for more QE (telegraph.co.uk)
- Institute of Directors urges Bank of England to inject extra £50bn into UK economy (telegraph.co.uk)