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Sovereign Rating News and Financial Markets Spillovers: Evidence from the European Debt Crisis-IMF Working Paper
March 29, 2011--Summary: This paper examines the spillover effects of sovereign rating news on European financial markets during the period 2007-2010. Our main finding is that sovereign rating downgrades have statistically and economically significant spillover effects both across countries and financial markets.
The sign and magnitude of the spillover effects depend both on the type of announcements, the source country experiencing the downgrade and the rating agency from which the announcements originates. However, we also find evidence that downgrades to near speculative grade ratings for relatively large economies such as Greece have a systematic spillover effects across Euro zone countries. Rating-based triggers used in banking regulation, CDS contracts, and investment mandates may help explain these results.
Pound hit by low confidence
March 28, 2011--Sterling dropped to its lowest level this year on a trade-weighted basis as expectations for a near-term rise in UK interest rates receded.
Sterling suffered as figures showed business confidence declined in March to its lowest level in two years, raising concerns over the health of the UK’s fragile economic recovery.
ESMA Data on Prospectuses Approved and Passported - July 2010 to December 2010
March 28, 2011--ESMA is publishing today the tables compiling the data on prospectuses approved and passported for the period July 2010 to December 2010 (with a quarterly disclosure).
The tables reflect the information as provided by the national competent authorites It is important to note that the compe-tent authorities have different internal databases in place that might lead to some divergences in the data provided.
view Report
ESMA Data on Prospectuses Approved and Passported - July 2010 to December 2010
Short-sighted' pension funds ignoring emerging market debt
March 28, 2011--UK – Pension schemes must look more closely at emerging market debt as a source of investment, Aberdeen Asset Management has urged.
A survey commissioned by the manager found only a quarter of the more than 100 UK schemes questioned allocated money toward emerging market bonds, despite predictions EM GDP will account for half of total global annual worth by 2017.
DB- Equity Research - Europe-European ETF Market Weekly Review : ETF investors €1 billion spooked by series of geopolitical events
March 25, 2011--Investment Outlook: Global events spook ETF investors across all asset classes
This week brought about the consolidation of a series of geopolitical events that have been unfolding since the beginning of the year. The ultimate impact of these events on the global economic recovery is not yet clear however, they gathered sufficient negative momentum and pulled the breaks on cash flow activity in the European ETF industry as well as most major equity indices. European equity benchmarks, DAX, Euro Stoxx 50, CAC and the FTSE 100 declined by 4.5%, 3.2%, 3% and 1.9% respectively.
Overall European ETP industry cash flows were €1 billion in the red, the largest single week outflow figure since the beginning of the year. The exodus was led by equities; they registered €755 million outflows which is also the largest weekly exit of money across all asset classes in the year 2011.
The market’s stress brought once more inquisitiveness to unearth value, and that led to experiencing outflows from broad regional indices and registering inflows on single country indices. Reallocations within equities were defined by European developed single country ETFs finding favor with investors over ETFs tracking European developed broad benchmarks. Euro Stoxx 50 ETFs witnessed outflows of €951 million while ETFs tracking the FTSE 100 gathered over €600 million in weekly cash flows.
Cash flows into US country benchmarked ETFs changed direction for the first time in the current year with weekly negative flows of €156 million. Japanese country ETFs registered €118 million of cash outflows in the previous week. UK, France and German equity market benchmarked ETFs received the bulk of the flows in the European developed country segment with €591, €186 and €145 million in cash flows respectively.
Emerging markets continued to show signs of weakness with total cash outflows of €211 million in the past week. Both single EM country indices, as well as broad EM indices registered outflows of €33 million and €178 million respectively.
Fixed Income ETFs had net outflows of €156 million in the past week. Money market ETFs saw the largest exit of funds with €126 million outflows, while all other fixed income ETF sectors saw marginal flows closer to zero.
Outflows across all segments marked commodity cash flow figures for the week totaling €172 million. This is in sharp contrast to the past weeks in 2011 where precious metals, energy or broad benchmarks would dominate the cash flow numbers for the week.
Assets under Management (AUM): Cash outflows and declining markets shave off €7billion in assets
Total European ETP assets decreased by 2.9% and ended the week at €229.2 billion. Weak markets and outflows had a double impact which led to the highest weekly loss in assets the current year of €6.8 billion for European ETPs. This amounted to wiping out the entire European industry’s asset growth since the beginning of the year.
Developed non-European country ETFs lost close to €1.5 billion in assets with US and Japan ETFs accounting for most of the decline.US & Japanese country ETFs registered asset declines of €807 and €641 million respectively.
Commodity ETP assets declined by 2% to end the week at €39.1 billion with most of the declines being brought in by precious metals. Drop in the spot prices of gold and silver have contributed significantly to the asset decline in the absence of any significant inflows.
Fixed Income ETF assets proved to be the most resilient with a minor decline of 0.3% to close at €42.1 billion week on week. Sovereigns gained close to €100 million in assets over the previous week to end at €23.7 billion.
On-Exchange Total Weekly Turnover: Across the board gains push Turnover to year highs
Investors were certainly out and about selling this week and this contributed to weekly on exchange ETP total turnover increased by a massive 77%, ending the week at year highs of €21 billion.
Equities saw the highest weekly increase this year by almost doubling its turnover from €9.1 billion to €17.3 billion in the last week. All segments within equities experienced a significant increase in volumes leading to year high turnover figures. Developed non-European ETFs alone added close to €2 billion in turnover led by a rise in Japanese & US country ETF trading volumes. Both European single country ETFs and broad European equity ETFs also added more than € 1 billion each in weekly turnover increase.
Commodities and fixed income turnover gained 29% and 51% to end the week at €2.3 and €1.3 billion respectively.
ETP Product Launch Calendar: 3 new launches, 16 cross listings
There were 3 new product offerings and 16 cross-listings in the European ETF space in the previous week.
Deutsche Bank launched 2 multi-asset ETFs, 1 equity ETF and the same issuer also cross-listed 1 commodity ETF across European exchanges in the past week. The multi-asset ETFs replicate the performance of the db Stiftungs Indices which aim to track a balanced and diversified portfolio of equities, fixed income, commodities and alternative investments. These ETFs were listed on the Deutsche Borse. The db x-trackers FTSE EPRA/NAREIT Global Real Estate ETF launched on the London Stock Exchange is an addition to the already existing real estate products which focus on Developed Europe and Euro-zone. Finally, a share class of the DBLCI-OY balanced ETF was listed on the London Stock Exchange.
RBS cross listed 10 equity ETFs and 2 commodity ETFs on Borsa Italiana. The equity listings included the leveraged and short ETFs on the DAX, Euro Stoxx 50, FTSE 100 and FTSE MIB respectively. Also cross listed were 2 ETFs offering Euro hedged exposure to Topix and S&P 500 indices. The commodity listings provide leveraged and short exposure to the S&P GSCI Capped Component 35/20 indices.
Amundi cross-listed 2 equity and 1 fixed income ETF on the Deutsche Borse. The ETFs track the MSCI Europe, MSCI EM & Euro MTS Euro-zone AAA government indices respectively.
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FSA confirms final rules for auditors’ client assets reports
March 25, 2011--The Financial Services Authority (FSA) has today confirmed rules to improve the quality and consistency of auditors' client assets reports.
The policy statement sets out ten new requirements for firms and their external auditors. In summary, these new rules will:
Confirm and clarify the standards required for auditors’ client assets reports in order to provide clear focus of accountability;
Increase the quality and consistency of information provided in the report so the FSA can better use it to undertake both firm and thematic reviews; and
Improve firms’ governance oversight of their auditors and their compliance with the client assets rules
view Auditor’s client assets report
ESMA Update Of The CESR Recommendations On The Consistent Implementation Of Commission Regulation (EC) No 809/2004 Implementing The Prospectus Directive (Ref: ESMA/2011/81)
March 25, 2011-ESMA has issued an update of the CESR recommendations on the consistent implementation of Commission Regulation (EC) No 809/2004 implementing the Prospectus Directive (Ref: ESMA/2011/81).
db X-trackers lists Global Fund Supporters ETF in London
March 24, 2011-Deutsche Bank’s ETF platform, db X-trackers, has cross-listed its pioneering Global Fund Supporters ETF in London.
The db x-trackers Global Fund Supporters ETF tracks the Dow Jones Global Fund 50 Index to Fight AIDS, Tuberculosis and Malaria(SM)™.
Following an initial launch
on the Frankfurt Stock Exchange in December 2010, the ETF can now also be
traded on the London Stock Exchange.
The index tracks the performance of the largest public companies that support the mission of the Global Fund, the unique global public/private partnership dedicated to attracting and distributing resources to prevent and treat HIV/Aids, tuberculosis and malaria. To date the Global Fund has committed over US$21 billion in 144 countries to support large-scale disease prevention, treatment and care programs. db Xtrackers’ management revenues after costs for running the Global Fund Supporters ETF will go directly to the Global Fund.
QuantHouse Extends its QuantLINK Network into the Nasdaq OMX Nordic Datacenter Putting Stockholm less than 12ms away from London
March 24, 2011--QuantHouse, the leading independent provider of end-to-end systematic trading solutions, announced today the extension of its QuantLINK proprietary fiber optic network into the Nasdaq OMX Nordic Exchange datacenter in Sweden.
This new service gives clients based in Sweden access to the entire European and US low latency offering from QuantHouse while global clients can benefit from an even more optimized Nasdaq OMX Nordic data feed and order routing service.
QuantHouse is a provider of end-to-end advanced trading solutions including low latency market data technologies, an alpha generation development framework and infrastructure trading services for systematic trading firms who want to take the lead.
Exchange Council marks milestones for migration of floor trading
New rules and regulations decided as well as earlier start of trading in Frankfurt from 8 a.m./ Migration to Xetra technology on 23 May
March 24, 2011--The Exchange Council of the Frankfurt Stock Exchange agreed on new rules and regulations today, marking another important milestone in preparation for the migration of floor trading to Xetra technology on 23 May.
The Exchange Council also resolved that trading hours on the Frankfurt Stock Exchange will begin at 8 a.m. for specialist trading. Specialist trading in Frankfurt will take place from 8 a.m. to 8 p.m. with a provisional start date for the new hours of 1 June. The core hours for continuous trading on Xetra will remain unchanged from 9 a.m. to 5.30 p.m.
“We offer international access to all securities traded on the Frankfurt Stock Exchange. The specialist model and the more powerful Xetra system will also make floor trading more efficient,” said Rainer Riess, Managing Director of the Frankfurt Stock Exchange. “With the move to Xetra and the earlier start of trading, Frankfurt Stock Exchange is strengthening its competitive position.”
