The first week of November was poised to be an interesting one for the financial world, and when all was said and done it did not disappoint. The benchmark S&P 500 index soared by 3.6% last week as traders cheered the return of a Republican dominated House of Representatives and strong gains for the GOP in Statehouses and the Senate as well. This surge by the Republicans looks to put the kibosh on a number of programs that many businesses were growing increasingly fearful over, including cap and trade and increased regulations in a number of sectors. However, the biggest news of the week came from the Federal Reserve, which announced a massive expansion of its quantitative easing program with a fresh $600 billion injection into the bond markets. The vast majority of the bonds went to medium maturity levels and look to help push down yields in an attempt to reignite the struggling U.S. economy. While the verdict is still out on this plan, it helped to set off an incredible rally in commodity markets as gold ended the week up 2.8% while oil finished ahead by an even more impressive 7.1%.
This week, a lack of central bank meetings and slim pickings in terms of earnings reports will have investors focusing on data releases and the important G-20 Summit in Seoul, South Korea. Later this week, heads of state from twenty of the world’s richest and most powerful nations will convene in South Korea’s capital in a historic meeting that will be the first G20 Summit in Asia outside of Japan. Likely to be on tap at this important meeting are discussions over currency policies, in an effort to discourage nations from continually devaluing currencies in an attempt to main export competitiveness. The Fed’s recent QE2 program also looks to be put under the microscope thanks to a variety of developing and industrialized nations who believe that the U.S. is hurting their economies with the new plan. “What the U.S. accuses China of doing, the U.S.A. is doing by different means,” said Wolfgang Schäuble, the German Finance Minister in regards to the Fed’s $600 billion bond buying campaign. So as November marches on and investors focus in on Seoul, we look for the following three ETFs to be in focus [for more ETF ideas, sign up for our free ETF newsletter]:
Why EWG Will Be In Focus: A number of data points highlighting the health of the German economy look to put EWG into this week. Of particular concern to investors should be the German trade balance levels and industrial production numbers, which are due out on Monday. Later on in the week investors should focus in on the German GDP growth figures, which should show how the nation has held up despite an increasingly strong euro. In addition to this plethora of data, one of the largest companies in the country, Siemens (SIE), which has a $72 billion market cap, reports earnings. The German juggernaut is expected to post $1.55 in earnings on revenues of $19.88 billion, which would cap off a great year for the company; shares have risen more than 30% year-to-date. Siemens, which makes up about 10% of EWG, reports earnings on Thursday [see also Three ETFs To Watch During The Great Currency War Of 2010].
PowerShares Dynamic Media Fund (PBS)
Why PBS Will Be In Focus: Despite an increasingly fragmented market, some of the country’s top media companies have managed to hold on to solid gains in 2010; PBS has posted a gain of 10% over the past quarter and 15% so far in 2010. However, these numbers could change very quickly by the end of the week since both Viacom (VIA.B) and Disney (DIS), two of the fund’s top ten holdings combining to make up close to 10% of the ETF’s total assets, are scheduled to deliver earnings. Of particular concern to ETF investors will be Viacom’s report since the company takes the top spot in the holdings for PBS.
Analysts expect a solid quarter from the company (as well as most other media firms) thanks to robust demand from political ads that has helped to boost prices 30% in September over beginning of the quarter prices. Newspaper and magazines also saw modest increases thanks to a surge in political spending. Analysts expect Viacom to report earnings of 69 cents a share on $3.29 billion in revenues, which represents little growth from the same period last year. If investors are able to look past this low overall growth and focus in on the positive news in the industry such as the ad-revenue growth at cable channels, PBS could be in for a solid week and may extend its outperformance over the broad S&P 500 index [also see The Ten Commandments Of ETF Investing].
iShares MSCI Peru Index Fund (EPU)
Why EPU Will Be In Focus: Although growth has been hard to come by in many developed markets in the Western Hemisphere, the same cannot be said for the small and quickly growing countries in South America. The nations of Colombia, Peru, and Chile have all posted tremendous gains so far in 2010. One of the top performing country ETFs has been EPU, which tracks the MSCI All Peru Capped Index. The fund has surged by about 40% over the past quarter alone, blowing out many broad-based emerging markets ETFs. This week one of the nation’s largest banks, Credicorp (BAP), gives its third quarter earnings report.
The company is projected to report earnings of $1.82 on revenues of just over half a billion dollars. Both of these numbers represent significant increases over the year ago period suggesting that the company has been able to grow quickly and that the country’s demand for credit and other financial services is booming. This could be great news for holders of EPU since it could signal that the fund still has plenty of growth opportunities and that Peru’s economy shows no signs of slowing down anytime soon.
BAP makes up 14.3% of the fund’s total assets and is already up more than 60% so far in 2010. A solid earnings report and upbeat comments in regards to the Peruvian economy heading into 2011 may just be able to extend the rally [see More Than Just Brazil: Latin America ETFs Surge Ahead].
Disclosure: Eric is long EWG, photo is courtesy of Christian Haugen.