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Britain calls negative Moody's outlook a 'reality check'
February 14, 2012--Finance minister George Osborne said Tuesday that the negative outlook Moody's placed on Britain's AAA credit rating was a "reality check" for anyone thinking the kingdom could duck tackling its debts.
The influential credit ratings agency downgraded the debt ratings of six European Union countries and placed negative outlooks on the top AAA ratings of France, Britain and Austria, blaming the ongoing fallout from the eurozone crisis.
In Britain, Moody's pointed to "increased uncertainty regarding the pace of fiscal consolidation" due to "materially weaker growth prospects" over the coming years.
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Source: EUbusiness
Short-Sale Bans Lifted As Markets Grow Less Volatile, France, Belgium Gain Confidence
February 14, 2012--French and Belgian regulators made separate moves Monday to ease restrictions on the short selling of financial stocks amid signs in recent weeks that the volatility that battered markets in the final months of 2011 had calmed considerably.
France's AMF market authority lifted a ban on short selling for 10 French financial company stocks that had been in force since August as the country's CAC 40 benchmark index had climbed back toward pre-August levels. It said the ban was lifted Feb. 11. It was imposed Aug. 12 after French bank shares plummeted following concerns about the European sovereign debt crisis. The decision, which was made in coordination with other European countries, was aimed at limiting price volatility.
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Source: Wall Street Journal
NASDAQ OMX to Deliver OTC Clearing and Risk-Management System to Poland's Leading Clearing House
Polish Clearing House KDPW CCP Commits to NASDAQ OMX's Sentinel Risk Manager for Its OTC Clearing Model
February 13, 2012--The NASDAQ OMX Group, Inc., today announced that it has been selected to deliver a risk management solution to KDPW_CCP, Poland's primary securities clearing house and CCP (Central Counterparty).
Under the contract NASDAQ OMX will supply KDPW_CCP with its OTC clearing and Sentinel Risk Manager product in order to support trade lifecycle and risk management requirements for clearing of OTC traded instruments.
Sentinel Risk Manager is part of NASDAQ OMX's multi-asset clearing solution for OTC and listed derivatives. This modular suite of products enables clients to license their required functionality while preserving their existing software investment. The solution provides real-time risk management that enables the CCP to protect the integrity of the clearing house and its members while enabling cross margin benefits. Sentinel Risk Manager is compliant with pending European and U.S. legislation for OTC clearing (EMIR in Europe and Dodd Frank in the U.S.). Today both NASDAQ OMX's Nordic clearing house and IDCG in the U.S. have integrated the Sentinel technology within their CCP infrastructure.
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Source: NASDAQ OMX
ESMA extends the deadline for the consultation on the considerations of materiality in financial reporting
February 13, 2012--The objective of financial statements is to provide information to a range of users for the purpose of eco-nomic decision making. To be useful, such statements must present fairly the financial position, perform-ance and cash flows of the reporting entity.
Where information which is required by the relevant financial reporting framework is omitted or misstated and such information could influence the economic decision-making of a user, financial statements cannot be said to achieve a fair presentation. The concept of ‘mate-riality’ is used to describe such information.
A recurring theme of discussions at the European Enforcers Coordination Sessions (a forum in which all European National Enforcers of financial information meet to exchange views and discuss experiences of enforcement of IFRS) is the apparent differing views regarding the practical application of the concept of materiality amongst preparers, auditors, possibly users of the financial reports and, in some instances, accounting enforcers. The purpose of this consultation paper is to seek comments from interested parties on their understanding of various aspects of materiality in an effort to contribute to a consistent applica-tion of this important concept in financial reporting.
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Source: ESMA
Moody's adjusts ratings of 9 European sovereigns to capture downside risks
February 13, 2012--As anticipated in November 2011, Moody's Investors Service has today adjusted the sovereign debt ratings of selected EU countries in order to reflect their susceptibility to the growing financial and macroeconomic risks emanating from the euro area crisis and how these risks exacerbate the affected countries' own specific challenges.
Moody's actions can be summarised as follows:
Austria: outlook on Aaa rating changed to negative
France: outlook on Aaa rating changed to negative
Italy: downgraded to A3 from A2, negative outlook
Malta: downgraded to A3 from A2, negative outlook
Portugal: downgraded to Ba3 from Ba2, negative outlook
Slovakia: downgraded to A2 from A1, negative outlook
Slovenia: downgraded to A2 from A1, negative outlook
Spain: downgraded to A3 from A1, negative outlook
United Kingdom: outlook on Aaa rating changed to negative
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Source: Moody's
Deutsche Borse developing new business area
All data and IT-related activities pooled Management change in IT
February 13, 2012 --By way of underpinning its growth strategy, Deutsche Börse is creating a new business area geared to extending its client reach and service offering.
In this move, notably IT with its system and service development and operating capabilities, Market Data and Analytics as well as selected external services are to be pooled under one roof. This includes, for example, the use of trading systems for other exchange companies, the business process offering in its entirety, IT operations for other financial service providers as well as network services.
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Source: Deutsche Börse
Deutsche Borse AG releases preliminary results for 2011
Best sales performance since record year 2008 // costs in-line with lowered guidance for 2011 // strong increase in earnings per share Acceleration of growth strategy through increased investments in 2012 // positive outlook for 2012 Regular dividend of €2.30 and special dividend of €1.00 proposed // share buybacks of up to €200 million planned for H2/2012
February 13, 2012--Deutsche Börse Group achieved its best sales revenue performance since record year 2008 based on preliminary 2011 numbers released on Monday. Sales revenue increased 6 percent to €2,233 million, while net interest income increased 26 percent to €75 million. Total costs amounted to €1,217 million, including around €83 million merger related and restructuring costs.
Adjusted for these items, total costs fell by 1 percent to €1,134 million. Adjusted net income grew 15 percent to €833 million in 2011. Adjusted earnings per share grew 16 percent to €4.49. Reported earnings per share more than doubled to €4.57.
In 2012 Deutsche Börse Group will increase investments in growth initiatives and infrastructure from €120 million to around €160 million. This accelerates Deutsche Börse Group’s growth strategy which is focused on 1) extending its products and services to currently unregulated and uncollateralised markets, 2) expanding its technological leadership and market data expertise, and 3) increasing its reach into new customer segments and growth regions. This strategic direction addresses changing client needs and supports the regulatory agenda pursued by the EU as a result of the global financial crisis.
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Source: Deutsche Börse
Expansion of the German equity option product suite
February 13, 2012--The international derivatives market Eurex Exchange introduced new equity options on 17 shares last Friday, 10 February 2012. 14 of the new options are based on shares which belong to the German mid-cap index MDAX. This latest offering completes Eurex's lineup of equity options on MDAX companies. In a further move, an additional 17 equity options based on individual shares in the TecDAX index will be introduced on 24 February.
This expansion will allow Eurex Exchange to offer equity options on all constituents of the German blue-chip indices DAX®, MDAX and TecDAX for the first time.
All of the newly listed derivatives are American-style options with a contract size of 100 shares. The minimum tick size is €0.01. Maturities of up to 60 months are available and consistent with all other German equity options. Trading hours are from 8:51 – 5:31 p.m. CET. In order to facilitate order book trading, market makers will continuously quote prices in the order book. In addition, bilateral trading is also possible for the new products until 7:00 p.m. CET every trading day via Eurex Exchange's OTC trade entry facility. The minimum transaction size is one contract per trade.
Source: Eurex
LCH.Clearnet Nearing Decision On LSE Deal
February 11, 2012-- LCH.Clearnet is expected to make an announcement "shortly" on talks with the London Stock Exchange Group PLC (LSE.LN) that could give the U.K. bourse a controlling stake, the clearing house's chief executive said, according to the Financial Times Saturday.
"We hope to announce something shortly," LCH.Clearnet CEO Ian Axe said Friday when asked about the state of talks, the paper said.
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Source: Wall Street Journal
DB - Equity Research-Weekly & Monthly European ETF Market Monitors: European ETF industry gets a fresh start in January
February 10, 2012--ETF month in perspective
2012: A fresh start for the European ETF industry
January brought a very strong start to the year for the global (US, Europe and Asia) ETF industry. ETF assets grew by 8.1% over January 2012, a growth rate that surpassed the overall 2011 year growth rate of 3.1%. Global ETF assets reached $1.4 trillion as of the end of January 2011, up from $1.3 trillion at the end of 2011.
Both the US as well as the European ETF industries grew by 8.2% and 6.5%, reaching asset levels of $1.0 trillion and €221.3 billion respectively. Most of the growth came from rebounding equity markets, however, flows accounted for 2.9% of the growth in the US market and for 1.1% of the growth in the European market (US$ terms). Cash flows for the US market totaled $27.1 billion and €2.4 billion for the European market, for the month of January.
The performance of the European ETF market in the first month of 2012 was sharply different from how it ended the previous year. European ETFs registered outflows of €2.2 billion over December 2011, a decline that was largely driven by equity outflows (€1.8 billion). This situation was reversed in January 2012, with equities contributing €1.5 of net inflows towards the new money that flowed into the European ETF industry.
The January 2012 European ETF industry fresh start was mainly driven by two factors. First, overall market conditions improved somewhat, with the Euro Stoxx 50 delivering gains of 4.3%. Better market conditions helped bring ETF investors out of their shell and allocate money back in the equity market. Second, the European Securities and Markets Authority, ESMA, issued its second consultation on ETFs. ESMA’s publication of its views provided comfort to investors as it gave an indication both about the regulatory body’s future intentions as well as its views with regards to perceived ETF risks.
Overall, the ESMA consultation was deemed to be balanced, avoiding any dramatic changes in the European ETF market, especially those that would put it at odds with how mutual funds operate under UCITS. The consultation provided further evidence that ESMA, through ETFs, which are perceived to be the golden standard in the fund industry, is looking to 'tidy-up' a number of wider fund management industry issues, such as tracking capacity and fund construction, primarily pertaining to total return swaps and securities lending practices .
ETF Industry: The month’s investment trends
The US Market: Flows across the board, from domestic to emerging markets
The US ETF industry registered strong cash flows in the first month of the year totaling $27 billion. Investors favor for risky assets continued in January with equities having the lion’s share in cash inflows ($19.3 billion).
US ETF equity flows were quite diversified, with both domestic as well as emerging markets benefiting. US domestic benchmarked equity ETFs brought inflows of $11.5 billion, while emerging market benchmarked equity ETFs saw inflows of $5.7 billion. Sectors also did well, attracting new money totaling $3.2 billion.
Fixed Income ETFs collected a healthy $7.7 billion in cash inflows; a healthy increase over the $6 billion inflows received in December. Commodity ETVs had a positive month, receiving cash inflows in excess of $1.5 billion which is in sharp contrast to last month’s pattern where commodities registered outflows of $2.7 billion.
For more information about analysis and trends in the US ETF market please refer to our US ETF Market Monthly Review.
The European Market: Emerging Markets main flow growth driver
Equity markets across Europe had a very positive run over the month registering advances across the board: DAX (↑ 9.5%), CAC (↑ 4.4%), Euro Stoxx 50 (↑ 4.3%) and the FTSE 100 Index (↑ 2.0%). Gold and silver spot prices (US$/oz), also appreciated by 9.8% and 17.6% respectively.
The European ETF industry improved on its poor run in December (outflows of €2.1 billion) and received cash inflows of €2.4 billion in January. Most of the flows went into ETFs tracking equity benchmarks (€1.5 billion) with healthy contributions by other asset classes; Fixed Income ETFs (€412 million), commodities (€331 million) and alternatives (€159 million).
Within equities, emerging markets (EM) benchmarks were back in vogue, collecting cash inflows of €904 million in January. The BRIC countries (Brazil, Russia, India & China) collectively pocketed cash inflows of €365 million while ETFs tracking broad benchmarks like the MSCI EM collected €385 million over the same period. Within ETFs tracking developed markets (DM) benchmarks, a clear divergence was visible: ETFs focused on North American region which includes US & Canada received cash inflows of €672 million while ETFs tracking European benchmarks registered outflows of €663 million. ETFs tracking broader DM benchmarks such as MSCI World received net cash inflows of €107 million over the month of January.
ETFs tracking European sectors registered cash inflows of €171 million in January as compared to outflows of €166 million in the month of December.
Despite the positive equity markets and healthy flows, a hint of bearishness continues to persist as evident from the flows into leveraged and inverse products. ETFs providing inverse and leveraged inverse exposure pocketed inflows of €272 million and €282 million in January respectively. On the other hand ETFs providing leveraged exposure registered cash outflows of €332 million.
Fixed Income ETFs registered cash inflows of €412 million over January as compared to outflows of €404 million in December 2011. ETFs tracking corporate debt issuances and sub-sovereigns collected inflows of €588 million and €117 million respectively. Money market & sovereign ETFs registered outflows of €249 million and €144 million respectively.
Commodity ETPs received cash inflows totaling €498 million in January which is marginally higher than the €198 million received in December 2011. Most of the inflows were into products tracking crude oil (€211 million) and diversified commodity indices (€131 million).
ETP investors approached gold products with caution in January, evident from the inflows totaling €56 million which is significantly lower than the €623 million received in December 2011.
ETF comparatives: Mutual Funds, cash equity turnover
European ETF turnover is 8.0% of the region’s cash equities turnover as of the end of January 2012. The equivalent number for the US market stands at 24.5%.
European ETFs comprised 2.8% of the continent’s mutual fund industry, yet ETF cash flows, €17.7 billion from Jan-Nov 2011, was over 1.4x higher than the corresponding unlisted fund flows (- €44 billion). European unlisted mutual funds registered outflows of close to €138 billion in the months of Aug-Nov 2011. Mutual fund industry data as per the European Fund Management Association (EFAMA).
US ETFs comprised 8.1% of the its mutual fund industry, yet ETF cash flows, $113 billion for 2011, was over 4.7x higher than the corresponding unlisted fund flows ($24 billion). Mutual fund industry data as per the Investment Company Institute (ICI).
To request a copy of the report
Source: Christos Costandinides, European Head of ETF Research & Strategy, Deutsche Bank
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