The flow of upbeat news on the health of the US economy shows no sign of abating. A better than expected non-manufacturing survey from the ISM added to a buoyant sister survey of manufacturing earlier in the week. The combined message from the two surveys is that the US economy grew at the fastest rate for ten months in January.

Business activity across the combined Chinese manufacturing and service sector broadly stagnated at the start of 2012, with the HSBC Composite Output Index falling from 50.8 to 49.7. There were divergences by industry, however, with continued manufacturing weakness contrasting with steady growth of services output.

Business activity in the Eurozone private economy was broadly unchanged in January, though a marginal increase in activity represents an improvement on the contractions seen at the end of last year. The Markit Eurozone PMI Composite Output Index posted 50.4 in January, up from 48.3 in December and above the no-change mark of 50.0 for the first time in five months.

Most Active Stocks reported on Markit BOAT

Broker Crossing Systems Report

Most Active Stocks reported on Markit BOAT

Broker Crossing Systems Report

Most Active Stocks reported on Markit BOAT

Broker Crossing Systems Report

Markit iTraxx Europe Final List Series 16

Markit iTraxx SovX Asia Pacific Series 6 Final Membership List

Markit iTraxx Asia ex-Japan Final List Series 16

Markit iTraxx SovX WE Series 6 Final Membership List

Markit iTraxx SovX CEEMEA Series 6 Final Membership List

Markit iTraxx Japan Final List Series 16

The European ABS market opened the New Year in the same fashion as it closed out the old – on a quietly positive note. As per much of last year, the core/periphery split persisted with spreads on the former continuing to grind tighter. Some securities from peripheral countries also saw improvements in pricing, Banco BPI recently provided a major boost by coming out with a tender offer on their three Duoro (Portuguese RMBS) transactions, close to ten points above secondary market levels. This also helped push some of the other Portuguese RMBS transactions higher. This enthusiasm was however short lived as the ongoing sovereign debt saga once again took centre stage, with most investors happy to sit on the sidelines.

Needless to say, 2011 has been a topsy-turvy year in the financial markets and the European ABS market was no exception. Several promising rallies were stifled throughout the year by continuing sovereign solvency concerns. However, every cloud has a silver lining and these concerns have also served to highlight the relative stability and credit quality of much of the asset class...

With most credit investors expecting the worst in Europe and with sovereign spreads going through the roof it seems that ABS securities, senior in particular, continue to be a safe haven of relative stability. Senior UK Prime RMBS and Dutch RMBS as well as Autos have suffered only a few basis points widening since the flash rally at the end of October.