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Derivatives investors flocked to Europe in February: BlackRock

Derivatives investors flocked to Europe in February: BlackRock

Quantitative easing, better-than-expected economic data and a weaker euro made Europe an attractive area for investors using derivatives in February, BlackRock analysts have claimed.

In the 41-page BlackRock paper ETP Landscape: Industry Highlights February 2015, analysts said that flows of exchange-traded products had been strong in February, with global ETP flows of US$50bn for the month.

They said US stocks had rallied and US equity ETP flows had rebounded after January, while emerging markets equity funds had shown signs of stabilising.

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The authors also noted that pan-European equity funds had attracted US$8.9bn (£5.9bn), helped by the ECB’s announcement of a quantitative-easing programme and a weakening currency.

Key investment themes from ETP activity in February 2015
Europe equity.
High yield corporate bonds.
Japan equity.

Source: BlackRock

On 5 March ECB president Mario Draghi announced that the central bank’s quantitative-easing programme would begin on 9 March 2015.

He said: “The substantial additional easing of our monetary policy stance supports and reinforces the emergence of more favourable developments for the euro area economy.

“In an environment of improving business and consumer sentiment, the transmission of our measures to the real economy will strengthen, contributing to a further improvement in the outlook for economic growth and a reduction in economic slack.

“Quantitative easing by the ECB, better-than-expected economic data and a weaker Euro extended the inflow streak to four months.

“Total Europe equity asset gathering was $11.5bn (£7.6bn) and has reached $22.3bn (£14.7bn) in 2015.”

The authors claimed investors had also been encouraged by news of a four-month extension to Greece’s bailout, which had eased short-term market tensions.

It added: “Though the euro did not depreciate as much as in January, US dollar-hedged ETPs with pan-European and German equity exposures remained popular. They accumulated a combined $3.8bn (£2.5bn).”

Adviser view

Jason Butler, senior partner for London-based Bloomsbury Private Wealth, said: “The market is normally discounting the future all the time: when the world is full of doom this is overplayed, and when the world is full of optimism this is overplayed.”