Daily ETF Roundup: BLV Tumbles, EPP Soars

by on September 1, 2010 | ETFs Mentioned:

U.S. equity markets surged higher to start September, as the Dow gained more than 250 points thanks to strong overseas data from China and Australia. The Nasdaq and S&P 500 also had banner days, as these benchmarks both tacked on close to 3%. This news helped to draw a few investors out of gold, which saw its price ease back below the $1,250 mark as traders embraced risk and bid up oil prices. Crude surged more than $2/bbl. on hopes of rising international demand. In currency markets, the dollar weakened against most rivals, falling against both the euro and the Australian dollar. This weakness in the greenback, combined with risk taking, pushed investors out of U.S. Treasury bills and sent yields soaring higher; the Ten year briefly touched 2.6% before settling back at 2.58%, while the 2 year finished the day yielding 0.51%.

Today’s robust gains came thanks to a flurry of positive data across the globe that helped to temporarily cool concerns over risky assets. The ISM factory index reading surged to 56.3 from 55.5 in the prior month, signaling growth in the manufacturing industry. Additionally, growth above expectations helped to propel Australian markets higher while high levels of manufacturing activity in the world’s largest exporter, China, helped to boost emerging market sentiment as well. The manufacturing report “gives some comfort, but that is only good until the next number,” said Darell Krasnoff, managing director at Bel Air Investment Advisors. This ‘next number’ will most likely be the unemployment report on Friday, which could signal if the jobs situation is finally beginning to improve.

The ETFdb 60 Index climbed 16.13 points, or 1.6%, starting the month off on a positive note. Winners outnumbered losers by more than two-to-one in heavy trading.

One of the biggest winners in the ETFdb 60 was the iShares MSCI Pacific Ex-Japan Index Fund (EPP), which soared by 4.5% in today’s trading. This robust gain came thanks to solid GDP growth in Australia, which rose to a seasonally adjusted level of 1.2% (well ahead of 0.9% projected growth). This boost was a result of a 5.6% rise in export volumes due to heavy demand from rising Asian economies hungry for the vast mineral deposits of Australia, especially coal and iron ore. “You don’t get a lot better than this, and it should set people straight about just where exactly the Australian economy sits,” said Adam Carr, senior economist at ICAP. Australia makes up two-thirds of EPP’s holdings, so further positive news out of the country is likely to continue to boost this Asia-Pacific fund [see holdings of EPP here].

One of the biggest losers on the day was the Vanguard Long-Term Bond ETF (BLV), which sank by 1.8% thanks to increased risk tolerance in the markets. While most corporate bonds were flat on the day, the biggest asset outflows came from the Treasury markets, which saw yields soar higher. Yields on 30 Year Treasuries rose by close to 13 basis points–pushing the long-term securities up to a yield of 3.65%–while Ten year bond yields rose by 10 basis points. U.S. T-Bills are tied with corporates as the top sector for BLV, but each of the fund’s top ten holdings are Treasuries, accounting for the Wednesday dip [see more on BLV's holdings here].

Disclosure: No positions at time of writing.