Uncertainty remains the name of the game in markets around the world as American equities oscillated between heavy losses and sharp gains last week. Geopolitical tensions in the Middle East kept the markets in check, while cautious outlooks from major central banks pushed the dollar slightly lower in the volatile currency markets. Domestic equities were range bound for the most part last week, though the S&P 500, Dow Jones, and NASDAQ all managed to etch out small weekly gains and affirm their slow and steady rise. Emerging market equities fared much better, posting a weekly gain of nearly three percent. Crude has been quite sweet (or bitter) depending on your position, as oil futures hit $104 a barrel on Friday with investors fearing further global supply disruptions in the important commodity. Gold pushed higher as well, hitting record highs of $1,441 an ounce mid-week amidst mounting fears of inflation and an ongoing investor preference for “safe-haven” asset classes. Surprisingly enough, domestic markets slumped on Friday despite the relatively positive employment data. The negative market reaction was unexpected given that non-farm payrolls grew at the fastest pace since last May, while the unemployment rate unexpectedly fell to 8.9% in February.
This week is relatively quiet for Wall Street in terms of major economic data and central bank decisions. Nevertheless, investors will pay attention to a multitude of statistics coming out overseas, including GDP and trade balance data from Japan, interest rate decision from New Zealand, and a list of manufacturing and economic statistics from China as well. Below, we profile three ETFs that are likely to be active in trading over the next five days [for more ETF insights, sign up for our free ETF newsletter]:
Egypt Index ETF (EGPT)
Why EGPT Will Be In Focus: The new year has already proven to be quite the wild ride, with political protests in Tunisia having managed to spread and influence insurgents to rise across the entire Middle East region. Political tensions emerged in Tunisia in December, and since then civilian protests have erupted in Egypt, Yemen, Libya, Iran, and Bahrain [see Middle East ETFs Under Pressure As Protests Intensify]. Egypt’s political tensions started on January 25th, and while there have been several key-developments, the political situation still remains unstable and the economic outlook for the country is concerning. The stock-exchange in Egypt has been closed since January 27th, and there have been multiple delays in its reopening.
EGPT tracks the Market Vectors Egypt Index, which provides exposure to publicly traded companies that are domiciled and primarily listed on an exchange in Egypt or that generate at least 50% of their revenues in Egypt. Since the protests began on January 25th, the fund has sold off more than 6% and short-term traders have been quick to realize profits given the incredible volatility which has ensued. News sources have indicated that trading on the Egyptian Exchange is set to resume on Sunday, however this has not yet been confirmed by the country’s new prime minister. Experts are concerned that following the markets reopening, traders and investors will be quick to execute orders, and likely contribute to an expected plunge. EGPT will come into focus this week as investors keep their eyes and ears open for any resolutions or developments out of the Middle East region.
Market Vectors Solar Energy ETF (KWT)
Why KWT Will Be In Focus: While rising energy prices have been less than favorable for Wall Street and main street consumers, the recent surge in oil prices has certainly shined some light on alternative energy investments. The solar industry is growing quite rapidly given the recent technological advances and cheap financing available to companies, as well as increasing demand from China and the USA. Government subsidies for energy-efficient investments are another catalyst which has been, and will continue to, serve as a catalyst in propelling the solar industry forward.
KWT tracks the Ardour Solar Energy Index, which provides exposure to publicly traded companies from around the world that derive at least 66% of their revenues from solar power and related products and services. One of the funds top holdings, Suntech Power Holdings (STP), is expected to release fourth-quarter earnings after the market closes on Tuesday, March 8, 2011. Suntech is China’s largest solar panel maker and the company designs, develops, manufactures, and sells photovoltaic products worldwide. The company is expected to grow tremendously in 2011, as it is well positioned to further gain market-share in the Chinese solar industry, which is already gaining momentum and attracting investments. Analysts are expecting for the company to haul in $843.26 million in revenues and generate earnings of 29 cents per share. News of this company’s report should heavily influence solar power markets this week and could help to ensure that the first full week of March is a volatile one for KWT.
WisdomTree Dreyfus New Zealand Dollar Fund (BNZ)
Why BNZ Will Be In Focus: The Reserve Bank of New Zealand is scheduled to release their decision regarding interest rates for March this coming Wednesday, March 9th, at 3pm (EST). The official cash rate in New Zealand has been at 3% since July 28, 2010. New Zealand’s closest and biggest trading partner, Australia, kept rates unchanged after their banks last meeting. The Aussie’s were fairly optimistic about the global economic recovery, however, they were reluctant to tighten monetary policy at the risk of hindering economic growth. On Wednesday of last week, New Zealand’s Prime Minister John Key said that the interest rate cuts by the central bank ought to be expected given the economic situation following the tragic earthquakes. Key stated, “I don’t think there is any question that it is helpful if there are lower interest rates to reflect what we are going through at the moment”. The currency markets reacted immediately, and the New Zealand dollar sank modestly against the U.S. dollar immediately following the news. With regards to the rate decision on Wednesday, analysts are expecting a rate cut to 2.75%.
The WisdomTree Dreyfus New Zealand Dollar Fund seeks to achieve total returns reflective of both money market rates in New Zealand available to foreign investors and changes in value of the New Zealand Dollar relative to the U.S. dollar. BNZ has shed 5% year-to-date, and the fund may continue to slide even lower if the Reserve Bank of New Zealand confirms the “cautious” outlook on the economy and developments going forward [see BNZ Fundamentals]. Investors interested in establishing either a long or short position in BNZ are advised to wait until after the decision and press conference, as currency markets entail significant volatility and it’s rarely in your best interest to try and gauge investor sentiment before the news release itself.
Remember to use stop-loss orders and disciplined profit taking for short-term trades and longer-term investment as well.
Disclosure: No positions at time of writing, photo courtesy of Alexander Efimov.
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