A QE Fixation

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.”

Gavan Nolan

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 iTraxx Europe 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.

Name	Sector	Volume	Turnover €
BANK ZACHODNI	Financials	159,918	8,706,201
THE VITEC GROUP	Industrials	150,303	861,186
ING BANK SLASKI	Financials	3,403	734,340
DRAEGERWERK	Industrials	11,624	591,496
ERG	Oil & Gas	51,559	498,542
SVM UK ACTIVE FUND	Financials	250,000	488,616
SONAECOM SGPS	Telecoms	309,841	449,129
POLSKA GRUPA ENERGETYCZNA	Utilities	74,429	405,159
INDUSTRIVÄRDEN AB	Financials	35,618	378,011
TESSENDERLO	Basic Materials	16,268	370,565

Top 10 ETF

Name	Volume	Turnover €
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

Name	Sector	Volume	Turnover €
VOLVO	Industrials	302,915,936	3,036,853,408
EDENRED	Consumer Goods	15,461,844	227,289,104
BANCO SANTANDER	Financials	14,400,000	138,241,722
SIEMENS	Industrials	1,339,538	104,082,099
SNAM RETE GAS	Oil & Gas	13,000,000	48,457,500
RIO TINTO	Basic Materials	1,000,000	44,377,990
BEKAERT	Industrials	200,000	39,649,500
RESOLUTION	Financials	12,895,685	36,705,911
DAIMLER	Consumer Goods	800,000	36,000,000
MAN AG	Industrials	450,000	35,532,000

Major Movers

Name	Sector	Volume	Volume (T-1)	% Change
VOLVO	Industrials	321,017,368	2,607,100	12213%
EDENRED	Consumer Goods	17,041,933	473,473	3499%
RENAULT	Consumer Goods	4,032,314	522,519	672%
RESOLUTION	Financials	13,749,041	2,148,376	540%
RSA INSURANCE GROUP	Financials	9,049,772	1,771,695	411%
DSG INTERNATIONAL	Consumer Services	13,189,099	3,320,540	297%
INTESA SANPAOLO	Financials	11,047,898	4,305,882	157%
DEBENHAMS	Consumer Services	9,797,333	4,389,560	123%
UNICREDIT	Financials	20,577,304	11,634,448	77%
VODAFONE	Telecoms	36,873,106	22,891,305	61%