This past week was an extremely choppy one for markets as shares rose modestly in Monday and Tuesday trading only to dive back Wednesday and finish the rest of the week mixed. Important data releases did little to clarify the broader economic situation, as GDP and jobless claims both came in better than expected but failed to move the markets in Thursday trading. Meanwhile, the European crisis still dominates headlines as traders go back and forth on if an expanded EFSF will both be approved and be enough to help highly indebted members such as Greece. Yet, the choppiness didn’t stop in equities as precious metals saw extreme levels of volatility as well. Gold and silver both oscillated between multi-percentage point gains and losses early in the week before stabilizing to close out the quarter, although it remains to be seen how these important metals react in the days ahead now that the home stretch of 2011 is underway.
This week, investors have a great deal of data to analyze as a number of central banks meet and and important figures regarding employment, European retail sales, and British GDP hit the markets. On the central bank front, the RBA, BOE, BOJ, and ECB all meet, and although all are key institutions, all eyes will probably be on the ECB and its ongoing response to the crisis within its currency bloc. Any commentary on steps being taken to alleviate this situation, along with the key interest rate decision, could move global markets and should be closely tracked by traders and investors alike. Closer to home, the ISM Manufacturing index comes out later today and is then followed by motor vehicle sales which are due out on Tuesday, helping to give investors a better picture of these important sectors. With this backdrop, investors should look for the following three ETFs to be in for an active week:
PowerShares Dynamic Food & Beverage Fund (PBJ)
Why PBJ Will Be In Focus: Despite the push towards consumer staples, many investors remain concerned over the near term future of these firms as pressures in key markets, such as Europe and China, are beginning to weigh on shares. For investors concerned about this trend, this week’s earnings release from global food giant Yum Brands (YUM) could help to set the record straight and guide sentiment heading into earnings season. Currently, analysts expect the company to post earnings of 82 cents a share on revenues of $3.09 billion, which compares favorably to the year ago period for both top and bottom line figures. However, investors should note that estimates have moved down over the past three months from about 84 cents a share, so some aren’t as bullish as they once were on the company’s growth prospects. Either way, look for this key earnings report, which comes out after the market closes on Tuesday, to set the tone for PBJ and the rest of the sector to start the month [see ETFs To Invest In Food: Five Ways To Play].
CurrencyShares Euro Currency Trust (FXE)
Why FXE Will Be In Focus: Anyone following the markets over the past month knows that European affairs have been dominating the headlines and this looks to continue this week as well when the European Central Bank meets this week in Frankfurt. Analysts remain extremely divided on the bank’s policy route going forward with some believing that rates are likely to stay on hold thanks to inflation concerns while others are calling for a cut to benchmark rate in order to support struggling economies around the region. For example, Adam Narczewski of X-Trade Brokers recently said, “The fact that October’s meeting is the last one chaired by (relatively hawkish) Trichet, further reduce odds of an easing”, while Yohay Elam of Forex Crunch, called for more easing saying that “Trichet is likely to cut the rates by 0.25% and not leave this task to Draghi.”
In addition to this key meeting, investors will also likely focus in on Slovakian politics as well. The country is now the next roadblock to an expanded EFSF so any votes or discussion of the subject is likely to weigh on markets and either stoke the fires in PIIGS nations or cool concerns going forward in the euro zone.
IQ Australia Small Cap ETF (KROO)
Why KROO Will Be In Focus: Thanks to worries over a Chinese slowdown and severe pressure in the commodity space, Australian equities have been under severe pressure as of late. In fact, this small cap ETF from IndexIQ has fallen by over 20% in the last month alone while its large cap focused counterpart, EWA, hasn’t done much better in the same time frame. Due to these losses and a general concern over the country’s markets, many investors are unsure of which direction interest rates will move when the bank acts next. This is further confirmed by economist expectations on the subject as of the 15 surveyed, three believe the cash rate will go down in the next eight months while five believe it will go up. As a result of these divergent view points, investors will try and read between the lines at this week’s key RBA meeting in order to figure out how the central bank feels the economy is doing, possibly leading to a few volatile sessions for KROO in the process [see holdings of KROO here].
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Disclosure: Long PBJ.