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Equity Index market briefing June 2020

Release date: 02 Jun 2020 | Eurex Exchange, Eurex Clearing, Eurex Group

Equity Index market briefing June 2020

Equity market strength continued in May on the back of aggressive central bank stimulus. Also, a lack of choice -between negative yielding German government debt and equity risk premiums- remains when it comes to asset allocation. This left investors in a quandary; while not wanting to miss out on positive momentum, they also question the divergence and disconnect to economic fundamentals. Despite markets posting another positive month, implied volatility remained comparatively well supported. A likely driver is the net short positioning by some hedge funds either through outright short index futures or long put options. Compared to the same period last year, interest in our EURO STOXX® Banks futures, mini-DAX futures and the EURO STOXX 50® Total Return Futures has risen. On the options side, the EURO® STOXX 50 month-end expiries and the STOXX® Europe 600 have seen notable increases.

Volumes across our dividend derivatives have stabilized as dividend pricing expectations continued their recovery. The EURO STOXX® Banks Index dividend future has seen solid ADV growth. Here, members will have taken note of the recently issued circular. The circular provides forward-looking guidance on how Eurex will treat dividend announcements by companies across all sectors, providing clarity and removing an element of uncertainty for all market participants.

Concerns over a second global market retracement dominate investor focus. Perhaps it’s the motive for the significant uptick we have seen in volumes for our MSCI World futures and options. These fears are well-founded, given the question marks over how limitless the central bank support is when faced with the upcoming wave of corporate solvency problems and the associated unemployment. As a result, we expect continued robust demand for hedging equity portfolio exposures. Eurex’s full suite of cost-efficient, transparently priced and centrally cleared derivatives represent a highly liquid solution. 

Zubin Ramdarshan, Head of Equity & Index Product Design, Eurex