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Equity Index market briefing January 2020

Release date: 03 Jan 2020 | Eurex Exchange, Eurex Clearing, Eurex Group

Equity Index market briefing January 2020

2019 can be described as an impressive assault on the wall of fear. Sure, there was some stuttering along the way but nearly all broad equity market benchmarks finished 2019 with strong double-digit growth and were the strong outperformer across the major asset classes after dividends reinvested. Even against the backdrop of a low to negative yield environment, it looks difficult to see a repeat for 2020. Traders and investors already had to digest the latest U.S.-Iran tensions and evaluate if it may develop into a more serious conflict. Meanwhile, last year’s on-going story, escalating and de-escalating trade tensions between the U.S. and China. seems likely to continue through 2020 and we’re also entering the final chapter of the Brexit saga. And, there is of course no small matter of the U.S. elections in November with the Democratic primaries beginning next month. A whole new wall needs to be assaulted again.

Looking back on 2019, Eurex introduced some significant new functionality and several new products. Our RFQ platform, EnLight, had a steady and promising start since its mid-year introduction. We expect further adoption by members throughout the year. Looking ahead to 2020, we will see in Q1 the launch of “Improve”, the new matching functionality that provides our members with a tool to guarantee their end-customers full execution of their order at a pre-discussed price or better, giving other liquidity providers the opportunity to also engage with this flow. The year also saw several product segments enjoying notable strong volume trends, such as our MSCI index futures and options segment, including the newly launched MSCI Saudi Arabia and also our index dividend derivatives were strong again. The EURO STOXX 50® TRFs welcomed several new buy-side entrants into the world of equity repo trading, and index weekly and EURO STOXX 50® month-end options were in extra high demand when volatility blipped-up at several points during Q2 and Q3.

For now, the upward market trend remains intact and in analysing the analysts -most predict tepid to moderate market growth with some risks already highlighted-, it appears as if an aggressive market retracement is the least predicted outcome. However, when market consensus converges, the risk of complacency slips in. So, we may see renewed demand for derivative hedging to protect what are already fantastic one-year returns. 

Looking ahead to new 2020 product launches, members and clients can already look forward to new ESG derivatives, extending the scope of what was one of the most successful new segments last year. Here, we’d like to give a big thank you to all the customers who have supported the ESG derivatives segment and who remain instrumental in growing it further.