Crossover index gains

European credit market spreads tightened on Monday as global stock prices saw a revival and investors took comfort from news that funds with big losses managed by Goldman Sachs will not be unwound. Trading volumes were more typical of the usual summer lull in August and significantly lower than the start of last week.
But traders said that does not rule out further volatility later in the week with US inflation data and more earnings on the agenda. The iTraxx Crossover index was 21 basis points tighter at 328 basis points by 1435 GMT, a trader said, although the index had moved as low as 322 basis points earlier. The investment-grade iTraxx Europe was around 5 basis points tighter at 45.25 basis points, the trader said. "We shouldn't neglect that we're still seeing a lot of volatility," the trader said. "Volumes are quite subdued but you still feel that liquidity is very limited."
"Markets are still nervous and I wouldn't expect volumes to stay like this for the entire week. We're just waiting for more news and watching the ABS commercial paper market."
A strong rally in European shares and a higher opening on Wall Street also buoyed sentiment, after markets took a beating at the end of last week. Goldman Sachs eased fears about heavy losses in two of its managed hedge funds - the flagship $8 billion Global Alpha and North American Equity opportunities - saying risk and leverage had been reduced in both. It did, however, acknowledge that Global Alpha had dropped 27 percent this year, with half of that decline coming last week.
Speculation about the extent of those losses had hammered Goldman shares last week. The US investment bank also said it and other investors have agreed to pump $3 billion into a third fund, the Global Equity Opportunities, that has run into trouble. "The fact that they have received this commitment is great news," the trader said.
US retail sales rose a slightly more-than-expected 0.3 percent in July, easing concerns that consumer spending and confidence may have been hurt by financial market instability. There were also signs that the primary market, which saw an abrupt closure when volatility flared up in mid-June, will be busy in September.
Poland's top oil group, PKN Orlen, plans to reconsider in September a postponed issue of eurobonds that were to refinance its 800-million-euro loan for its Mazeikiu purchase, its chief executive said on Monday. It called off the issue last month because of volatile market conditions.