After sinking for much of the day, equity markets surged in the final half hour of trading to finish flat on the day. All the major American indexes finished within about 0.1% of their starting points, while commodities stayed relatively flat as well. One of the big winners on the day came in the Treasury markets, as prices rose again and yields on 10 year Treasuries fell below the psychologically important 3.00% mark. This came after weak manufacturing data and bearish reports out of China which suggested to many that inflation would not be on the Fed’s radar screen for quite sometime. “Deflationary forces and the Fed’s ‘on hold’ posture will make it rather difficult to see any backup in Treasury yields,” said Tom di Galoma, head of U.S. rates trading at Guggenheim Partners. Despite this surge in demand for fixed income securities, investors piled into equity markets in the final hour of trading as embattled oil giant BP reported that its latest attempt to plug the oil spill in the Gulf Of Mexico appears to be successful; this news pushed shares of BP higher by close to 7.6% in Thursday’s trading.
The ETFdb 60 Index, a benchmark measuring the performance of ETFs available through ETFs, added 1.52 points, or 0.2%. Winners outnumbered losers by almost two-to-one on the day.
One of the biggest losers in the ETFdb 60 was the iShares FTSE/Xinhua China 25 Index Fund (FXI), which fell by 1.5% in Thursday trading. This drop came after it was reported that Chinese GDP growth fell to 10.3% from a robust 11.9% in the first quarter. While this was expected by economists, who predicted a GDP gain of 10.5%, factory growth was sharply lower than most predictions. That set off fears over a slump in the world’s most populous nation. Factory growth fell to 13.7% for June compared to a 15.3% forecast and a May reading of 16.5%. “The good news is the economy is holding up. The bad news is investment is coming down, hence demand for commodities will fall.” said Dong Tao, chief non-Japan Asia economist for Credit Suisse in Hong Kong [see holdings of FXI here].
One of the biggest winners in the ETFdb 60 was the United States Natural Gas Fund (UNG), which soared by close to 6.5% in today’s trading. This sharp boost came after confirmation that Americans turned on their air conditioners full blast to combat triple digit temperatures across much of the Midwest and densely populated Northeast. According to a report from the Edison Electric Institute, the record heat increased electricity production by 8.7% this week from the same time a year ago; that helped to push up natural gas prices since the commodity is often used by utilities to create electricity. Despite this large uptick, UNG is still down 23.1% so far in 2010 [see fundamentals of UNG here].
Disclosure: No positions at time of writing.