American equity markets started the day on a weak note thanks to troubles in Europe, but surged in the final few hours of trading on hopes of a solution in Greece. The Dow finished the day up by 1.3% while the broader indexes posted better performances, gaining 1.4% for the S&P 500 and 1.6% for the Nasdaq. Commodities, on the other hand, largely finished the day down as gold’s safe haven appeal declined, sending the precious metal below the $1,825/oz. level while oil fell off its recent highs, sinking by about 1.8% in comparison. Softs were more mixed on the day as many grains rebounded from yesterday’s slump while livestock products finished in the green pretty much across the board.
In currency trading, the dollar fell broadly against most currencies, sinking by about half a percent against the euro and about 0.3% against the yen. The greenback did, however, rise against the loonie and the Aussie dollar as a number of key commodities fell, hurting these natural resource intensive currencies. Although the dollar was the weaker against the euro and the yen, this didn’t transfer into too big of a sell-off in Treasury bonds as the Ten Year stayed at the 2.00% mark and the two-year finished around the 0.2% level.
One of the biggest ETF winners on the day was the Vanguard European ETF (VGK) which soared by 2.4% in today’s trading. Today’s gains came thanks to hopes for a resolution in the Greek crisis as the leaders of Greece, France, and Germany suggested in a teleconference that Greece is an ‘intergral’ part of the euro zone. This helped to calm many fears that Greece was on the verge of dropping the euro or was headed to a catastrophic default. “The Greek Prime Minister confirmed the absolute certainty of his government to take all necessary measures to implement the conditions in its totality,” the joint statement from Merkel, Sarkozy, and Papandreou read. Thanks to this, investors shook off their recent worries regarding the European debt crisis and went bargain hunting in European equities, helping to reverse much of the losses that the region had experienced in past days [see charts of VGK here].
One of the biggest losers in the ETF world was the Market Vectors TR Gold Miners Fund (GDX) which slumped by 1.9% in Wednesday trading. These losses came as traders looked for riskier assets, selling off gold and pushing towards higher growth corners of the market instead. This was largely a result of the joint statement outlined above as well as hopes from European Commission President Jose Manuel Barroso on euro zone bonds. In the statement, Barroso discussed the possibility of issuing joint euro zone bonds, which could help highly indebted members survive the current crisis. Thanks to this, gold prices fell about eight dollars an ounce on the day, pushing investors out of gold mining equities and into other, riskier corners of the market [see holdings of GDX here].
Disclosure: No positions at time of writing.