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DB - Equity Research-Weekly European ETF Market Monitor-Swapping gold for volatility?
May 16, 2012--Signs of an interesting trade emerge
European ETP cash flow patterns this week paint a very interesting picture. The week brought nothing unussual in the long equities space, mild negative pressure continued leading to a total of €226 million of equity ETF outflows. The only country that experienced inflows over €100 million was Germany, but that was by no means a game changer. DAX benchmarked ETFs gathered a moderate €175 million over the week.
Fixed income and commodities investment patterns this week yielded much more interesting information, with fixed income ETFs experiencing inflows of €339 million and commodity ETPs experiencing outflows of €493 million. Fixed income inflows were led by sovereign benchmarked ETFs (€300 million), primarily German government bunds (€210 million). Commodity ETP outflows were driven by gold product outlows (€463 million).
Historically, gold ETP inflows spiked during periods of negative equity market pressure and high volatility. Similarly, during such periods, other perceived safe assets, such as bonds issued by highly rated sovereigns, experienced inflows. The week just passed registered a departure, with gold ETPs loosing close to 50% of 2012 YTD flows, as market uncertainty rose.
The week that ended on May 11th saw gold ETPs experiencing outflows of €463.1 million, bringing year to date ETP inflows down to €541.9 million. Conversely, ETPs targeting volatility indices saw year to date inflows rise to €614.9 million.
Gold - $/oz- price (BBG ticker GOLDS) declined by 12.8% from its high point this year, (28/2/12: $1,784.2/oz), to its low point (14/05/12: $1,5567/oz). Conversely, over the same period, the price of the VSTOXX (BBG ticker: V2X), an index designed to measure volatility of the Eurozone by looking at implied vol on Euro Stoxx 50 index options, rose by 37.5%, reaching 33.3 as of May 15th, its highest point in 2012.
The decline in gold’s price is most likely due to a combination of escalating market worries and political uncertainty in Europe, coupled with the lack of monetary accomodation both in the US and Europe. Together, these factors resulted in more extreme risk aversion than the environment that historically led to gold inflows.
The large majority of gold outflows came from Swiss based phsically backed gold ETPs.
Most of the YTD volatility inflows were received by the Nomura Voltage Mid-Term Source ETF, a product that tracks an index which allocates exposure of between 0% and 100% to the S&P 500 VIX short-term futures index, with the remainder earning a three-month US treasury bill rate. The proportion of the strategy index invested in futures contracts varies dynamically, with allocations increasing, the more "spot" volatility exceeds a 30-day historical average.
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Source: Christos Costandinides, European Head of ETF Research & Strategy, Deutsche Bank
Vanguard brings low-cost ETFs to Britain
May 16, 2012--U.S. group Vanguard, the world's third-largest exchange-traded-funds provider, has launched its first products in Britain, hoping to steal business from rivals by pushing a low-cost model that has been successful in its home market
"In the U.S., ETFs are a very large part of our business and account for a significant amount of new cash flow," Nick Blake, head of retail at Vanguard Asset Management told Reuters.
"The key thing is about access ... They are just another way to index with many more ways to access."
Vanguard Asset Management, a subsidiary of Vanguard, will list five ETFs on the London Stock Exchange . ETFs -- funds tracking baskets of shares, bonds or commodities that are traded like stocks -- have become increasingly popular among investors seeking cheap access to indexes without having to buy the underlying securities.
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Source: The Guardian
Bank of England Inflation Report, May 2012
May 16, 2012--Overview
Output had barely grown for a year and a half and was estimated to have contracted slightly in the
past two quarters. The euro-area economy remained weak, but global activity overall continued to
expand at a moderate pace. A number of one-off factors are likely to affect the pattern of quarterly growth of domestic output during 2012.
Looking through those effects, underlying demand growth is likely to remain subdued in the near term, before a gentle increase in households’ real incomes and consumption helps the recovery to gain traction. Stimulus from monetary policy should continue to support demand, although headwinds from the external environment, tight credit
conditions and the fiscal consolidation are likely to persist. The possibility that the substantial challenges within the euro area will lead to significant economic and financial disruption continues to pose the greatest threat to the UK recovery.
CPI inflation stood at 3.5% in March 2012, down from a peak of 5.2% in September 2011. That fall reflected the effects of earlier increases in energy prices and VAT dropping out of the twelve-month inflation rate. The prospects for inflation are uncertain. The near-term outlook is judged to be somewhat higher than expected three months ago, with inflation now likely to remain above the 2% target for the next year or so.
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Source: Bank of England
Bank of England cuts growth forecasts, warns on euro crisis
May 16, 2012--The Bank of England on Wednesday cut its forecast for British growth and warned that the eurozone debt crisis was the biggest threat to recovery, even if a credible solution is found.
Gross domestic product (GDP) was predicted to grow by just under 1.0 percent this year, down from the central bank's previous forecast of just over 1.0 percent, the Bank of England (BoE) said in a quarterly report.
It also slashed the 2013 growth estimate to 2.0 percent, down from previous guidance for 3.0-percent expansion. Annual inflation was forecast to remain stubbornly above the central bank's 2.0-percent target until mid-2013.
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Source: EUbusiness
Vanguard throws down the gauntlet in Europe
May 16, 2012--Vanguard Asset Management has thrown down the gauntlet to rival exchange-traded fund providers in Europe by confirming plans to launch five low-cost ETFs on the London Stock Exchange.
The new range of Vanguard ETFs represents the US fund manager’s first foray into ETFs listed on European exchanges. It currently offers ETFs listed in the US, Canada, Australia and Mexico.
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Source: Financial news
Deutsche Boerse publishes 2011 Corporate Responsibility Report
May 16, 2012--Deutsche Boerse has published its Corporate Responsibility Report for 2011,presenting its initiatives over the last financial year. The company continues to focus its corporate responsibility on these four areas of activity: economy, employees, environment and community.
“We feel connected” is the theme of the latest CR Report. As part of its
diverse stakeholder relationships, Deutsche Boerse places great value in an
open dialogue in which all parties are given a voice. This enables the company
to understand and take account of different needs, allowing these to inform its commitment. The CR Report explains in detail which needs and wishes Deutsche Boerse has encountered, and how the company has dealt with them.
The complete CR report for 2011 is accessible online
at
www.deutsche-boerse.com/corporate_responsibility.
Source: Deutsche Boerse
BME to offer co-location service for market members
The service makes the Spanish stock exchange one of the most accessible in the world
May 16, 2012--BME announced today it will offer co-location services to all its Members, after expanding its communication infrastructure and IT systems in its Data Processing Centre, in Madrid.
In addition, BME will provide high-tech facilities to house Member’s automatic trading systems. The goal of this service is to improve the speed of access to the Spanish market, in this way enhancing liquidity and improving price formation.
Through this new service, which will be available in the fourth quarter, the Market Members’ IT systems will be placed just a few meters away from BME’s Cash and Derivatives trading platforms. This closeness will significantly reduce the communication times between both systems, as a result of which Members will enjoy greater operational capacity. The whole infrastructure of the service will be managed by specialised BME staff, in this way ensuring fairness in terms of access and a secure system.
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Source: BME
Greek euro exit 'would cost France EUR 50 bn'
May 15, 2012--France would face a bill of 50 billion euros ($64.3 billion) if Greece were forced to quit the eurozone, outgoing French Finance Minister Francois Baroin warned Tuesday.
Speaking to Europe 1 radio, Baroin said that in addition to the costs to the state, French banks and insurance companies with Greek assets would lose out, but he predicted that they could survive this.
"We have loaned 50 billion," he said, referring to France's part in the EU fund set up to protect weaker member states from default.
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Source: EUbusiness
Fiscal Policy: Growth dimension and control of new Commission powers needed
May 15, 2012--The European Commission should have more control over fiscal policy in EU Member States, but not the free rein it asked for, says the Economic and Monetary Affairs Committee in texts, voted on Monday, stating a position on the economic governance "two pack".
This increased power must be democratically controlled and serve to spur economic growth, MEPs say.
The vote was not without acrimony as centre left and centre right groups were divided on whether the timing was right for a vote. "The world was a different place when the Commission made its proposals and the Council is also shifting its position on how much austerity is needed", said Elisa Ferreira (S&D, PT), one of the rapporteurs, said before the vote.
"Changes in the political environment happen all the time. We should vote because this legislation should enter into force as quickly as possible in view of the persisting crisis" Jean-Paul Gauzes (EPP, FR), the other rapporteur, replied. A slim majority was then secured for the votes to be taken.
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Source: European Parliament
HSBC Revamps Exchange-Traded Fund Business
May 15, 2012--HSBC (HBC) has moved its European exchange-traded-fund platform into the bank's global asset management division, in a restructure of its ETF business.
HSBC Global Asset Management will be accountable for the HSBC ETF product platform and its distribution activities, the asset management business said.
The bulk of the ETF business including ETF sales, product development and marketing teams will now operate under asset management, while market making and ETF pricing will continue to operate under global markets.
The restructure follows the December exit of Mark Rodino, the bank's head of ETF sales in Europe, and the transfer of its global head of ETFs, Farley Thomas, into the investment banking arm earlier this year.
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Source: Wall Street Journal
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