U.S. equity markets sank across the board as fears over the Euro zone and debt in Spain and Italy led to a broad sell off. The Dow finished the day down 131 points while the S&P 500 and the Nasdaq slumped by 1.2% and 1.6%, respectively, as a 3.2% loss from tech giant Oracle pushed the Nasdaq to the biggest loss of the three main benchmarks. Meanwhile, commodities were mixed but trended to the downside as many traders scooped up U.S. dollars leaving most of the soft and industrial commodities no where to go but down. Gold rose by $8/oz. while silver was flat, although the more industrial copper fell by close to 3.5% on the day. Similar losses were had in the soft and energy markets as well, as fears of demand drying up compounded with a stronger greenback to start the week on a down note for many commodities. Unsurprisingly, in currency markets the euro, pound, and Australian dollar all finished the day lower by about one cent against the U.S. dollar, pushing the U.S. dollar index up past the $76.1 mark, a gain of roughly 0.9%. “We continue to see the markets move towards de-risking as investors are concerned about the continued sovereign risks in Europe which has led to the dollar strengthening, coupled with new fears that global economic growth has peaked,” said Mark Bronzo, who helps manage $26 billion at Security Global Investors in Irvington, New York. “These fears are magnified by the imminent end to QE2 and the prospect of a sharp reduction in government spending.”
One of the biggest losers on the day was the iShares MSCI South Korea Index Fund (EWY) which fell by 3.7% to start the week. Although much of the focus was on the ongoing mess in Europe, the turmoil was impacting markets a continent away as traders pulled out of emerging and quasi emerging securities across the board in order to buy up assets in less volatile markets instead. Additionally, traders remain wary over a labor depute at Yoosung Enterprise Co, which is a major supplier of key parts to car companies in the nation. “auto stocks, which had been leading gainers benefiting from the March earthquake in Japan, fell today as it remains unclear when production at Yoosung, the main supplier of core engine parts in South Korea, will be back on track” said Bae Sung-young, a market analyst at Hyundai Securities. As a result of these worries over production as well as foreigners pulling out of the Korean market, EWY was among the biggest losers on the day, not only in the ETFdb 60, but in the broader Asia-Pacific region as well [see fundamentals of EWY here].
One of the biggest winners in the ETFdb 60 was the iPath S&P 500 VIX Short-Term Futures ETN (VXX) which gained 3.3% on the day. Today’s gains came thanks to the turmoil in Europe which reignited traders’ demand for safe haven assets as well as products that are inversely correlated to broad markets, such as VXX. This popular ETN tends to gain heavily in times of market uncertainty, and the VIX is often known as the ‘fear index’, gauging investor confidence in the marketplace. As a result of this role, VXX surged higher on robust volume of just under 26 million shares, roughly eight million more than an average day. If uncertainty in Europe continues, investors could see further spikes out of VXX in the near future, welcomed news for those that have been watching the fund for quite sometime as the product is down 19% over the past quarter alone [see more charts of VXX here].
Disclosure: No positions at time of writing.