American markets rose again in Thursday trading as some of the world’s most important central banks launched a coordinated effort to provide dollar liquidity to market participants through the end of the year. Thanks to this bold move by the ECB, SNB, BOJ, and BOE, as well as coordination from the Fed, the Dow managed to gain close to 1.7% on the day, beating out the tech-heavy Nasdaq which rose by 1.3% but failing to match the slightly higher gain from the S&P 500. In commodity markets, oil finished close to the $89.25/bbl. mark on hopes of more economic activity while gold slumped below $1,800/oz. as European fears continue to cool off. Other resources were more mixed as most energy products rose, almost all of the softs fell, and industrial metals rose broadly.
In currency trading, the U.S. dollar fell against most of the world’s major currencies, sliding by about 1.4 cents against the euro and about half a cent against the pound. The dollar also saw weakness against the resource currencies as well, falling by about .7% against the Aussie dollar and 0.6% against the Canadian dollar. Big losses were also had against the Swiss franc, as one franc is now worth about $1.15 in dollar terms. Thanks to this move away from dollars and the return of the ‘risk on’ trade, Treasury bonds had a rough day too. The Two Year edged up to the 0.2% yield level while the Ten Year soared, adding nine basis points and finishing the day at the 2.09% yield mark.
One of the biggest ETF winners on the day was the Vanguard European ETF (VGK) which rose by 2.6% in the session. Today’s surge was largely thanks to the infusion of liquidity by some of the world’s key central banks, a move that helped to ease fears of a liquidity crunch in the short term. The agreement also helped to dismiss concerns over funding at some of the continent’s biggest banks, especially French ones that were recently downgraded by Moody’s. “This provision of U.S. dollar liquidity to European banks — channeled from the Fed via ECB, BoE, and SNB — confirms our view that policy makers are not asleep and have learned lessons from the post-Lehman credit tightening that caused unwanted bank de-leveraging,” said Dan Dorrow, strategist at Faros Trading in Stamford, Conn. Thanks to this, VGK was easily one of the biggest winners in the ETFdb 60 on the day, adding to the fund’s near term strength and helping to reverse its malaise from earlier in the quarter [see charts of VGK here].
One of the biggest losers in the ETF world was the United States Natural Gas Fund (UNG) which slumped by 3.4% on the day. Today’s losses, which came on high volume of nearly 15 million shares, was largely the result of a bearish supply report from the EIA. In the weekly update, the organization stated that stockpiles of the vital heating and cooling fuel rose by 87 bcf for the week, beating out expectations which called for an increase of 80 bcf. This increase was a little below the year-ago period figures but was about eight bcf more than the five-year average, pushing traders to sell off contracts in the fuel after the report.
Nonetheless, thanks to a relatively hot summer, current stockpiles are a little less than the five-year average for the fuel, allowing UNG to gain back some losses before today’s report. In fact, the often beaten down fuel is actually up 2.2% over the past four weeks and nearly 2.3% in the past week alone. However, with today’s bearish report and the beginning of more moderate weather across much of the nation, UNG could once again resume its longer term trend downward in the months ahead [see more on UNG's Fact Sheet].
Disclosure: No positions at time of writing.