American markets were rangebound for much of the day until shortly before the close when Moody’s downgraded Ireland to ‘junk‘ sending equities plunging to finish Tuesday trading. The Dow and the Nasdaq led on the downside as the DJIA fell by 0.5% and the Nasdaq sank by 0.7% while the broader S&P 500 managed to lose a little less, sinking by 0.4% in comparison. Commodity markets, on the other hand, rose pretty much across the board led by a 1.3% gain in gold and a 1.7% surge in oil. Grains also finished the day sharply higher as both corn and wheat gained more than 4% while sugar led the way on the upside, adding 5.4% to its price. Nonetheless, the U.S. dollar index did manage to rise by almost 0.2%, finishing the day over the key $76 level. The dollar gained marginally against the euro and the Aussie dollar, but slipped against the yen as the Japanese currency saw its value rise to just under the 80 yen mark.
One of the biggest winners in the ETFdb 60 was the Market Vectors TR Gold Miners Fund (GDX) which soared by 3.2% on the day. Today’s gains in the popular gold equity fund came as traders sought refuge in the precious metal from both the debt crisis in Europe and the brewing problems in the U.S. in regards to a debt ceiling hike. The metal also gained on the release of the Fed Minutes which showed uncertainty regarding the central bank’s position in the near term. Some members of the FOMC called for additionally monetary policy stimulus if growth remains subdued and unemployment remains high, sparking further interest in the yellow metal as a hedge against further U.S. dollar debasement. Thanks to this, investors bought up shares of GDX since the fund represents a leveraged play on gold, helping to carry the fund to the top spot in the ETFdb 60 during Tuesday’s trading session [see holdings of GDX here].
One of the biggest losers in the ETF world today was the iShares MSCI South Korea Index Fund (EWY) which sank by 1.7% in Tuesday’s session. These losses were largely the result of a broad risk-off trade in the marketplace as investors fled the relative volatility of emerging and quasi-emerging nations such as South Korea for more stable markets. “Foreign funds flowed out of local stocks due to re-emerging concerns over the European debt crisis. Appetite for safe assets will continue until the European countries unveil clear measures to stem the crisis,” Lee Jae-man, an analyst at Dongyang Securities in Seoul, told Xinhua earlier today. Thanks to this sentiment, EWY sold-off on the day, falling by more than its counterparts in the Western world. The fund is now down close to 2.2% over the past week but it has gained 4.4% in the last two weeks, showing just how quickly things can change in the current environment [see charts of EWY here].
Disclosure: No positions at time of writing.