German stocks led European ETFs higher Monday, despite weak
German business data. China dragged emerging markets into the red
as the ETF tracking the world's second-largest market fell for
the 10th session in a row.
Elsewhere, investors cheered comments that Charles Evans,
president of the Federal Reserve Bank of Chicago, made in Hong
Kong saying that the Fed needs to start buying mortgage-backed
securities until the economy improves.
Morgan Stanley Smith Barney Lifts European
IShares MSCI EAFE Index (
), tracking developed foreign markets, rose 0.17%.
IShares MSCI Germany Index Fund (
) climbed 1.09% as it held above key support at its 200-day
It's rallied for seven straight weeks. Its IBD
Accumulation-Distribution Rating improved to B- improved from D
over that period. That means institutional investors went from
being heavy sellers to strong buyers in the ETF.
A key German business sentiment indicator, the Ifo, fell to
its lowest reading since March 2010. It fell for the fourth
Trading volume was very quiet as traders awaited U.S. Federal
Reserve Chairman Ben Bernanke to speak Friday at the annual
meeting of central bankers in Jackson Hole, Wyo.
In a monthly investment report, Morgan Stanley Smith Barney
said it is overweighting U.S. markets -- especially large-cap
growth stocks -- and emerging markets, where policymakers are
focusing on supporting growth more so than controlling inflation.
It increased exposure to Europe, although it remains
"Valuation indicators generally suggest market prices are
already incorporating a below-average economic outlook," Jeff
Applegate, chief investment officer at Morgan Stanley, and his
colleagues, wrote. "After an extended period of underperformance,
the European market looks a bit less vulnerable to further large
"With the continued emphasis on fiscal austerity and the
distinct possibility that Greece may exit the monetary union,
potential pitfalls remain."
China Weighs On Emerging Markets
Led by losses in Chinese stocks,IShares MSCI Emerging Markets
) dropped 0.88%.IShares FTSE China 25 Index Fund (
) dropped 1.32% as it broke below its 50-day moving average. Its
50-day line fell below its longer-term 200-day moving average in
May, which is very bearish.
Morgan Stanley economists lowered their outlook for China,
estimating 8.0% gross domestic product growth this year vs. the
prior estimate of 8.5%. They lowered the 2013 GDP forecast to
8.6% from an earlier projection of 9.0%.
"China's ability to protect and nurture growth domestically is
in question and regardless will have a much less profound impact
on the global economy in the near-term than in prior stimulus
periods," Waverly Advisors wrote. "The final day of reckoning has
yet to pass for Europe, making any euro-denominated asset
exposure fraught with risk unless actively managed.
"China can't save the world, the European Union can't fix what
is broken without feeling much more pain, and the U.S. looks like
the least dysfunctional of the primary wealthy economies (if only
by a modest margin)."
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