According to the January Euro Banks report from Goldman Sachs Group, Inc. (NYSE:GS), European banks put up a strong performance in the first month of 2013. Trading volumes were up and Equity Capital Markets were strong in January, but there were weaknesses in the investment banking system.
The above chart shows the daily trading volumes in European Capital Markets in January by sector. Equity Capital issuance in the month came to $12.3 billion, up 9% month on month, and up 13% year on year. Monthly ECM issuance has been above $10 billion for five consecutive months, the best run in the segment since the first half of 2011.
Debt Capital Markets did not perform quite as well in the month, however. The debt markets were down by 11% year on year, though the figure was up 286% month on month. That increase is mainly due to January’s traditionally strong showing in the seasonal debt market. The real figure to look at is the 11% drop year on year, exhibiting a decline in the market.
Another positive from the report was the increase in trading volumes in the period. Average daily trading volumes increased by 17% in December, though volumes were down by 6% in January 2012. The trend is viewed as an encouraging start to the year, and one that might continue. There are, it should be obvious at this stage, no guarantees in the European financial markets.
Mergers and Acquisitions activity was disappointing in January. There was a 66% drop off in activity in the sector over December and a 6% drop off from January of 2012. The high level of M&A announcements in the fourth quarter of 2012 has yet to result in a substantially enhanced level of completion. The lag in the market is not encouraging for investors.
Despite some encouraging signs and some disappointing ones, European equity markets were up significantly in the month of January. Equities were up 4% across the board over December 2012 close. The trends represent lower gains than those in the United States, but they are substantial in a continent still teetering on the edge.
Goldman Sachs Group, Inc. (NYSE:GS) report recommends UBS AG (NYSE:UBS) above other investment banks in Europe as an investment possibility. The analysts suggest that UBS has the greatest ability to take advantage of positive trends in the markets.
January was a mixed month in the European financial sector, but the Goldman Sachs Group, Inc. (NYSE:GS) report remains optimistic. January’s trading may represent the start of a recover in Europe. But as with any other year in Europe, it’s in no way a sure bet.