Equity markets finished sharply lower last week as investors sold off virtually every asset class and the S&P 500 and the Nasdaq both lost more than 5%. Commodity markets also suffered as gold and oil fell dramatically while the euro strengthened. U.S. markets remained bogged down due to poor data reports on both the employment and manufacturing fronts, which threaten to drag the country back into a double dip recession [also see Six ETF Stories From The First Six Months Of 2010]. As the third quarter begins the outlook for the rest of the year remains murky; only a handful of earnings reports and U.S. data releases are on tap this week, so markets may lack direction until earnings season fully kicks off. However, there are some important reports coming out overseas, as well as a few key central bank meetings which look to put currency ETFs in focus during the holiday-shortened week. Below, we profile three ETFs that look to be in focus over the next several days [for more ETF ideas, sign up for our free ETF newsletter]:
iShares MSCI Switzerland Index Fund (EWL)
Why EWL Could Be In Focus: A strengthening euro looks to be welcome news to Swiss authorities, who had been intervening in the currency markets in order to ensure that the franc did not appreciate too rapidly against the euro. The country will also have a series of data releases this week which that could impact the franc as well as the Swiss equity markets. First up is Swiss retail sales, followed by important figures regarding the consumer price index on Tuesday. These numbers, which are expected to show an uptick of 0.9% year over year, look to put inflationary pressures in focus and could be a signal for what the Swiss Central Bank will do next in regards to interest rates. Lastly, the Swiss unemployment rate is due out on Thursday and is expected to decline by 10 basis points. If this figures impresses, look for EWL to get a boost this week [also see Looking For Consumers? ETFs To Play Millionaire-Heavy Countries].
iShares MSCI Canada Index Fund (EWC)
Why EWC Could Be In Focus: Many have cited the impressive resiliency of the Canadian economy and its banks as reasons for investment in EWC. However, with slumping commodity prices and a weak jobs report in the United States, it will be interesting to see if the Canadian economy is able to create more jobs, and continue to hold their unemployment rate lower than their American counterparts. On Friday, the country is scheduled to release data regarding its June unemployment figures as well as the country’s net change in employment. The net change in employment is expected to rise modestly while the unemployment rate is likely to remain at 8.1%. However, if the country reports robust numbers on Friday, especially given the lackluster American jobs report, it could be good news for investors in EWC [also read Do You Need A Canada ETF?].
Rydex CurrencyShares Australian Dollar Trust (FXA)
Why FXA Could Be In Focus: The Australian economy looks to be in focus this week as investors delve deeper into the mining tax deal. Additionally, several key data reports are due out this week on the Australian economy, potentially shedding light on the economic outlook. The focus of the week is likely to be on the Reserve Bank of Australia and whether the bank will change its benchmark rate from 4.5%. Another key data piece is likely to be the Australian trade balance, which is especially crucial for this export driven economy. Should these data reports go smoothly look for FXA to take off as a result [also see this report on investing in currency ETFs of commodity dependent nations].
EWG: In good news for Chancellor Angela Merkel, her candidate for the position of German President, Christian Wulff, was elected after three rounds of voting. However, the election was more difficult for Merkel than expected as many members of her party voted for an opposing candidate, suggesting the chancellor may have trouble holding together a coalition going forward. Due to this uncertainty, as well as a stronger euro, EWG fell by 3.6% on the week [see more on EWG's fact sheet].
MOO: This agribusiness ETF suffered greatly last week as one of its main components, Monsanto, posted a terrible quarter that saw profits drop by 45%. This was largely due to rapidly declining prices of Roundup, which is having trouble competing with Chinese competitors that are currently producing more than twice as much as the world is demanding of the main ingredient in the product. MOO fell by more than 5% on the week as the poor quarter from Monsanto dragged many agribusiness names lower [see more holdings of MOO].
FXS: Despite a drop on Thursday after the Swedish Central Bank gave a poor assessment of the euro, FXS gained 2.1% on the week as the governor said that the country’s economy is developing ‘strongly’. He also hiked the rate by 25 basis points up to half-a-percent but trimmed the growth forecast for the country due to the likelihood of continued weakness in the euro zone [see technical analysis of FXS].
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Disclosure: No positions at time of writing.