Daily ETF Roundup: GDX Rises On Slumping Dollar, VXX Declines On Greek Optimism

by on June 21, 2011 | ETFs Mentioned:

U.S. equity markets rose broadly in Tuesday trading as participants bet on the Greek Prime Minister surviving the confidence vote after the bell and forcing more austerity measures through to stave off default. Thanks to this, the Dow was up close to 0.9%, while the S&P 500 gained 1.3% and the Nasdaq surged by close to 2.2% on the session, largely thanks to a 2.5% gain for CSCO and a 3.1% boost from AAPL. Commodity markets finished markedly higher as well, as gold gained about six dollars an ounce and oil continued to bounce back, gaining close to 44 cents in Tuesday’s session. Softs, which had been under pressure as of late, were among the biggest winners on the day as corn and orange juice both rose by more than 3% on the day while other products such as cocoa and wheat, gained more than 1.0% as well. These gains in commodities largely came as traders once again embraced risky assets in light of declining fears in Greece; the dollar index was down more than half a percent and the benchmark 10 year note saw yields rise up to 2.98% on the day. 

One of the biggest winners in the ETFdb 60 was the Market Vectors TR Gold Miners Fund (GDX) which surged by 3.4% in today’s trading session. These sharp gains for this ultra popular equity fund came as a weaker dollar helped to boost commodities across the board and increase the appeal of foreign assets as well. International mining companies dominate the list of GDX’s top holdings so this was certainly part of the reason for the fund’s surge although the ongoing Greek crisis is helping to boost demand for the metal in European markets as well. A little over three weeks ago gold prices in euros reached an all-time high and with ultra low interest rates in both the U.S. and some European markets– namely Germany– some investors have decided to scoop up gold as a hedge against further turmoil in the region.  Thanks to these European investors, GDX managed to post a solid gain in today’s session but the fund is still down close to 7.5% over the past two weeks suggesting that the greenback’s strength is overriding any euro zone buying of the precious metal [see more on the GDX fact sheet].

One of the biggest losers on the day was the iPath S&P 500 VIX Short-Term Futures ETN (VXX) which sank by 3.3% in Tuesday trading.  Today’s losses for VXX continue the recent downturn for the fund as investors have shed some of their worries over the Greek situation. Although the confidence vote for George Papandreou didn’t take place until after the market closed, investors bought stocks across the board on expectations that the Prime Minister would survive the vote and would be able to carry out the necessary austerity measures to prevent a Greek default. “If the Greek confidence vote this evening passes, the better tone for risk should continue short term,” said Adam Cole, global head of foreign-exchange strategy at RBC Capital Markets. Thanks to this speculation, demand for this ETN representation of the ‘fear index’ was minimal as many traders stormed the exit of this product for risky assets, driving volume close to 50% higher than normal for the ultra-popular ETN [see fundamentals of VXX here].

Disclosure: No positions at time of writing.