Investors finally saw a decisive down day in the markets,
ending the relatively bullish trend that many had been seeing for
the past few weeks. This abrupt shift wasn't the result of any
changes in the U.S. market though, as all eyes centered on the
tiny nation of Cyprus and their bank bailout.
The country appears likely to vote on a very controversial
plan that could tax all deposits in the small nation at a rate of
nearly 10% for those with more than 100,000 euros deposited. This
is pretty surprising as it comes just days after Cyprus leaders
assured depositors that a tax was not in the works, and that all
their capital was safe.
This no longer appears to be the case and it has called into
question future bailouts of other weak countries in the region.
After all, if this can happen in Cyprus, many are wondering, what
is to stop it from happening in other fiscally weak nations in
This speculation reignited worries over key markets and sent
stocks tumbling across the globe. Asian benchmarks finished the
day down about 2% on average, while European and American indexes
did slightly better, but were still down on the day (read
2 Sector ETFs Posting Incredible Gains
Commodities and bonds were also volatile, as investors
embraced safe havens and hard assets alike. Gold and crude were
both up on the session, while American benchmark debt saw yields
slump thanks to higher demand for low risk assets.
Meanwhile in the ETF world, there was a great deal of
interesting trading activity thanks to this market shift. Many
key products saw trading volumes that were in-line with averages,
but a number of leveraged and currency funds saw heavier volume
In particular, ETF investors saw a big volume day out of the
PowerShares US Dollar Bullish Fund (
. This ETF saw volume levels that were roughly 1.5 times higher
than normal, largely thanks to the demand for dollars and the
exodus away from euros (see
What's next for Currency ETFs?
This is especially important in this ETF, as the majority of
its exposure is in euros anyway. Thus, when investors are having
an opinion on this currency-as well as the rest of the global
currency market-this fund is a popular choice. During today's
trading, the ETF added about 0.7%, continuing the bullish trend
for this product in the short term.
Another in focus product was the
ProShares Short MSCI EAFE ETF (
. This inverse fund usually does about 75,000 shares in volume,
but today saw a spike to a roughly quarter million shares a day,
largely thanks to the renewed fears of a European problem (read
the Guide to the Most Popular ETFs
The ETF also moved higher in the session, gaining about 1.2%,
thanks to its heavy European exposure. In fact, Europe accounts
for roughly two-thirds of EFZ's exposure profile, so any more
negative news out of the continent is very likely to have a
positive impact on this inverse ETF going forward.
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ISHARS-EAFE (EFA): ETF Research Reports
PRO-SH MSCI EAF (EFZ): ETF Research Reports
SPDR-SP 500 TR (SPY): ETF Research Reports
PWRSH-DB US$ BU (UUP): ETF Research Reports
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