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European Trading Volumes Rise Before Last Options Expiry

European trading volumes surged as investors prepared for the last options expiry of 2012 amid optimism that U.S. President Barack Obama and Republicans will agree on a budget.

The Stoxx Europe 600 Index (SXXP) rose 0.4 percent to 280.31 at 2:57 p.m. in London and the volume of shares changing hands was 38 percent higher than the average of the last 30 days, data compiled by Bloomberg show. On Dec. 21, futures contracts and options on equity indexes and single stocks expire in a process known as triple witching that can increase trading volatility.

“Higher volume may have to do with Friday’s last option expiry for the year, some optimism on the fiscal cliff and the fact that strategists are bullish on prospects for 2013,” said Stephane Ekolo, chief European strategist at Market Securities in London. “The Santa Claus rally may be around the corner,” he said, referring to a common upswing in the last five days of the year and the first two in January.

The volume of shares traded on Spain’s IBEX 35 jumped to two-and-a-half times the average of the last month, while in Asia, activity on Hong Kong’s Hang Seng Index rose to more than twice the average level, according to data compiled by Bloomberg.

President Barack Obama proposed a budget plan that would cut about $1.2 trillion in federal spending and raise a similar amount in taxes, according to a person familiar with the talks.

“If there is a budget resolution, equities will clearly perform the best out of all the assets,” said Jim Reid, a strategist at Deutsche Bank AG in London.

Equity volumes have declined globally, with NYSE Euronext, Deutsche Boerse AG and Nasdaq OMX Group Inc. all reporting reduced trading of stock and options this year. CME Group Inc. (CME), the world’s largest futures market, said in October that third- quarter profit fell 31 percent as trading in interest-rate contracts slid the same amount.

To contact the reporter on this story: Nandini Sukumar in London at nsukumar@bloomberg.net or @NandiniSukumar on Twitter

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net

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