American equity markets, which started the day on a high note thanks to a solid jobs report, finished the day markedly below their highs as concerns over the situation in Europe once again were at the forefront. The Dow and S&P 500 finished ahead by 0.4% while the Nasdaq managed to post a gain of 0.5% in comparison. Commodity markets were more mixed as gold managed to rebound from its fall earlier in the week, gaining $13/oz., while oil conitnued to show weakness, falling by just over 2% in Friday trading. In currencies, the euro was especially weak against the dollar as rumors of Greece exiting the euro and reintroducing its own currency surfaced, potentially suggesting that some of the peripheral members may not be in as good of shape as initially thought. Thanks to this, investors continued to flow into U.S. Treasurys as the 10 and two year notes both saw yields fall while the U.S. dollar index added 0.9%, continuing the currency’s bounce against its rivals across the world.
One of the biggest winners on the day was the iShares MSCI Brazil Index Fund (EWZ) which gained 1.6% in the session. Today’s gains came as traders rejoiced the results of the country’s benchmark IPCA consumer price index which showed a lower than expected increase for the month of April. In the month, prices rose 0.77%, slower than the 0.79% rise in March, and under the predicted level of 0.84%. This suggested to many that the country’s measures to keep inflation in check were finally taking hold and that further rate increases would be unnecessary to keep prices under control. “The worst is over and is being left behind in April,” said Brazil’s Finance Minister Guido Mantega. “Starting in May … inflation will be under control.” This was welcomed news to the many financial institutions that populate the holdings of EWZ, leading to a nice surge in the fund to close out the week [see holdings of EWZ here].
One of the biggest losers in the ETF world was the iPath S&P 500 VIX Short-Term Futures ETN (VXX) which tumbled by 2.1% to close out the week. Today’s losses came as traders returned to equities thanks to a reasonably good report on the jobs front. The U.S. economy gained 244,000 jobs in April, the most in a single month in five years, helping to reverse some pessimism that was growing over the reports from earlier in the week that had suggested a slowdown in hiring. It also helped that analysts, on average, were predicting a gain of just 175,000, numbers that would have represented a slowdown from March’s 221,000 level. “It’s a good report. The payroll numbers are solid,” said Stephen Stanley, chief economist at Pierpont Securities. “I think the economy is starting to gain traction.” Thanks to this, demand for the main ETN tracking the ‘fear index’ fell sharply even though the fund saw volume exceed 30 million shares on the day. Nevertheless, VXX is still up 7.2% over the past week, and 1.9% over the past two week period suggesting that even though traders saw a flat market today, the overall trend has been to higher volatility in recent sessions [see charts of VXX here].
Disclosure: long EWZ.