European ETF trading commentary for the week ending 26 February 2010, provided by LaBranche Structured Products Europe (LSPE).

European equity markets lost around 2% last week in what was a rather quiet session given the major MSCI rebalancing at the end of the month. However, we did not see panic ETF block selling as we had done in certain products during the course of the month.

About 75% of our creation/redemption flows and 30% of our total flows were in bond ETFs. In the primary market, creations outweighed redemptions by 3:2. The majority of our creations were concentrated in the iShares Euro Corporate Bond (LSE: IBCX) and iShares Barclays Euro Corporate Bond (LSE: IEAC) ETFs.

The iShares FTSE UK All Stocks Gilt ETF (LSE: IGLT) had a small rally from the 18-month low recorded the previous week and gained 1.4% on net buying (although in the primary market we still ended up with net redemptions after healthy two-way activity).

However, short-term euro government fixed income ETFs such as the Lyxor ETF EuroMTS 1-3 (NYSE Euronext: MTA) and the iShares Euro Government Bond 1-3 fund (LSE: IBGS) saw big sellers; LSPE participated both on- and off-screen in what appeared to be active switches from short-term to mid-/long-term bonds.

We saw renewed interest in listed private equity ETFs such as the iShares S&P Listed Private Equity fund (LSE: IDPE) and the Lyxor ETF Privex (NYSE Euronext: PVX), with strong on-screen volumes early in the week (+2% gain overall). We were also active in funds tracking German indices such as the DAX and MDAX on strong buy recommendations from two German banks.

Meanwhile, we had decent two-way flows in ETFs tracking the healthcare (SXDP) and construction (SXOP) sectors but ended up redeeming some banking sector funds (SX7P).

Finally, the ETFS Copper ETC (LSE: COPA) was again on the radar, gaining 2% over the course of the week, with strong buying interest following a small recovery in the price of copper.

This report is not an offer to sell or a solicitation of any investment products or other financial product or service, an official confirmation of any transaction, or an official statement of LSPE.