Equity markets experienced another volatile week, but managed to eke out a gain despite a rough Friday that saw major indexes shed more than 1%. Despite a gain on the week, the S&P 500 shed close to 9.5% on the month, one of the worst performances for the index in over a year. After plunging for several weeks, oil managed to shoot higher by about 6%, which helped to erase a chunk of the losses that the commodity has suffered in May. Two key events helped to set the tone for the markets; not surprisingly, both were directly related to the ongoing fiscal crisis in Europe. On Thursday, markets were boosted by comments from China that squashed rumors of the nation looking to get rid of some of its euro zone debt holdings. However, markets on Friday resumed their tumble as ratings agency Fitch downgraded Spain from AAA to AA+ on fears that a recovery would be stunted by a sharp decrease in government spending. The holiday shortened week will be light on major central bank meetings, but Europe is likely to remain in focus amid key data releases and a few earnings reports. Below, we profile three ETFs that could seen an active week:
Global X/InterBolsa FTSE Colombia 20 ETF (GXG)
Why GXG Could Be On The Move: Colombian markets look to be in focus this week as the results from the presidential election become clearer. The country voted on Sunday, choosing between six major candidates with Juan Manuel Santos, the representative of the U Party, and Antanas Mockus, the representative of the Green Party, expected to be in a dead heat. But Santos trounced his primary competitor in the first round; reports indicate Santos received approximately 47% of the vote, compared to only 21% for Mockus. Santos is seen as most likely to continue the current president’s policies, but the significant responsibilities of the Colombian president (whose duties include both those of a both a head of state and central bank head) mean that markets will be watching thr outcome very carefully (see Colombia ETF In Focus Ahead Of Tight Election).
Merrill Lynch Retail HOLDR (RTH)
Why RTH Could Be On The Move: On June 4th, information about May unemployment figures will be released as the market opens. The unemployment rate is expected to jump higher from 9.9% to 10.0%, while hourly earnings and the average workweek look to stay relatively flat but could post modest gains as well. Should the unemployment rate manage to sink, it could help to alleviate market concerns regarding Americans’ ability to continue spending. RTH is heavily weighted to Wal-Mart (19.7%), so a spike in the unemployment rate could be a negative development (see RTH’s holdings page).
Egypt Index ETF (EGPT)
Why EGPT Could Be On The Move: On June 1st, Egypt will go to the polls in order to elect the Shura council, which is the upper house of the Egyptian Parliament. It will be interesting to see if the election goes smoothly given the current state of affairs in the country and its policies regarding opposition parties. One of the largest is the Muslim Brotherhood, which despite being officially outlawed managed to get several of its candidates approved as independents in the upcoming election. However, the group has limited hopes for the fairness of the election saying that it was unlikely its members would win as military leaders and rivals in the ruling National Democratic Party would prevent them from scoring votes. The Muslim Brotherhood said a victory in the June 1 contest would be “unprecedented” as none of its members has served on the Shura council, so should the group manage to win a few seats look for EGPT to be in for a volatile week (see holdings of EGPT here).
XHB: This homebuilder ETF saw its price surge on Tuesday and Wednesday after the government reported solid home sales for the month of April. Existing home sales rose by 120,000 compared to last month while new home sales posted a 84,000 gain over March numbers. These strong numbers helped to propel XHB to a 3% gain on the week, despite being rangebound on both Thursday and Friday (see charts of XHB here).
CYB: On Monday President Hu Jintao pledged more reforms to China’s currency controls, but gave no timetable for the changes and said that his country, and not outside pressure, would set the pace of any reforms. The summit was also overshadowed by rising tensions on the Korean peninsula, as both the North and the South put their armies into a state of readiness unseen in years. CYB remained unchanged for much of the week before falling on Friday to sink by 1.6% on the week (see CYB’s technical analysis page).
XLI: Large manufacturing firms sank to start the week but rose sharply in the middle of the week and looked to post a strong gain to finish the month. However, a weak Chicago PMI number on Friday which saw the index dip below 60, pushed XLI 1.3% lower on Friday leaving the fund with a still respectable gain of 4.6% on the week (see more fundamentals of XLI).
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Disclosure: No positions at time of writing.