Tag Archives: european

Dollar May Hit Parity With Euro: Bet On These ETFs

With the prospect of interest rate hike back on the table, dollar is likely to hit parity with Euro anytime soon. This is especially true as the Fed hinted at a modest December lift-off if the U.S. economy remains on track. The tight monetary policy will reduce the supply of money flowing into the economy, leading to strength in the greenback. As a result, dollar resumed its clear upward journey against the basket of other currencies, rising over 6% in the past one month. And guess what? The latest string of economic data is clearly supporting this view with October payrolls logging the biggest gain this year, unemployment falling to a new seven-year low of 5% and average hourly wages showing the sharpest growth since July 2009. Consumer confidence is also up, with the University of Michigan consumer sentiment index rising to 93.1 in early November from 90 in October, after dropping to 87.2 in September from 91.9 in August. While the manufacturing sector expanded at its slowest pace in more than two years in October on a weak global economy and strong dollar, rise in new orders spread some hopes in the sector. After two straight months of decline, inflation also rose a modest 0.2% last month – an important factor in the Fed rate hike decision. All these suggest that the U.S. economy is showing an impressive rebound after a lazy summer and looks strong enough for a December rate increase. On the other hand, euro has been slumping against the dollar and tumbled 6% in the past one month. The European Central Bank (ECB) has been looking for more stimulus measures as soon as December to spur growth in the economy and fight against deflation. Currently, the ECB is pumping €60 billion ($68 billion) per month into the sagging economy courtesy of its QE program that began in March and will run through September 2016. These diverging policies will continue to drive the U.S. dollar upward, thereby resulting in depreciation of the euro against the greenback. Further, the latest terrorist attack in the capital of France parked geopolitical tensions and raised concerns over the slowly recovering economy, pushing the euro down. Meanwhile, the tragedy has shaken investors’ confidence around the world, encouraging them to take a flight to safety in the U.S. dollar. If the current trend persists, the EUR/USD parity may be seen as euro will continue to fall while dollar will continue to rise. Investors seeking to tap this opportune moment could bet on the following ETFs. PowerShares DB US Dollar Bullish Fund (NYSEARCA: UUP ) UUP is the prime beneficiary of the rising dollar as it offers exposure against a basket of six world currencies – euro, Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc. This is done by tracking the Deutsche Bank Long US Dollar Index Futures Index Excess Return plus the interest income from the fund’s holdings of U.S. Treasury securities. In terms of holdings, UUP allocates nearly 57.6% in euro while 13.6% collectively in Japanese yen and 11.9% in British pound. The fund has so far managed an asset base of over $1 billion while sees an average daily volume of around 2.2 million shares. It charges 80 bps in total fees and expenses, and gained 4.9% over the past one month. The fund has a Zacks ETF Rank of 3 or ‘Hold’ rating with a Medium risk outlook. WisdomTree Bloomberg U.S. Dollar Bullish Fund (NYSEARCA: USDU ) This product offers exposure to the U.S. dollar against a basket of 10 developed and emerging market currencies by tracking the Bloomberg Dollar Total Return Index. The fund allocates higher to the Euro at 30.3%, closely followed by Japanese yen (18.5%), Canadian dollars (11.8%) and Mexican peso (10.1%). Other currencies like British pound, Australian dollar, Swiss franc, South Korean won, Chinese yuan and Brazilian real receive single-digit allocation in the fund’s basket. This ETF has amassed $248.4 million in its asset base and charges 50% in expense ratio. Volume is light as it exchanges nearly 195,000 shares a day on average. The fund added 3.5% over the past four weeks. ProShares Short Euro (NYSEARCA: EUFX ) This fund seeks to deliver the inverse return of the daily performance of euro versus the U.S. dollar. It is often overlooked by investors as it has just $17.9 million in its asset base while volume is light at around 16,000 shares per day. It charges 95 bps in annual fees and added 6.3% over the past month. Original Post

4 Sector ETFs Crushing The Market In Q4

We are in the middle of the final quarter of this year and the U.S. stocks are shrugging off all global worries and geopolitical issues to give stellar performances. This is especially true as the S&P 500, Dow Jones, and Nasdaq have climbed 6.7%, 7.4% and 7.7%, respectively, so far this quarter and erased all the losses made in the third quarter. Notably, all the three major indices logged the biggest gains last month since October 2011 after a tumultuous ride in August and September. The robust gains were attributed to better-than-expected earnings reports especially from a number of technology players, a wave of mergers & acquisitions, and improvement in the battered energy sector. Additionally, recent headwinds have faded with substantial positive developments seen in the global economy and financial market lately. In particular, the Chinese economy is regaining momentum on the back of better-than-expected GDP growth data and another rate cut, emerging markets are showing signs of stability, and the Japanese and European central banks are seeking additional stimulus measures to revive their economies. Further, seasonality is driving the stock market higher given the crucial holiday shopping season and an expected Santa Claus Rally. Moreover, better economic data including the October jobs report, consumer confidence, inflation and manufacturing data have also injected optimism. All these good tidings have increased the appeal for riskier assets once again leading to a bullish trend in stocks, though bouts of volatility still show up. Given this, we have highlighted four sectors and their related ETFs that have easily crushed the broad market funds by wide margins and been the star performers since the start of the fourth quarter. Energy Despite the fact that oil is exhibiting large swings in its prices, the energy sector has been leading the way higher this quarter. Decreasing U.S. output, a declining rig count, recovering global fundamentals and improving demand are driving up the price of oil, which on the other hand is under pressure from persistent supply glut and a strong dollar. As a result, crude oil price rose to over $49 per barrel in early October and is currently on the verge of going back to the $40 level. While most of the energy ETFs has delivered solid returns, the oil exploration & production corner has been the biggest winner with PowerShares Dynamic Energy Exploration & Production ETF (NYSEARCA: PXE ) gaining 16.3% quarter to date. This fund tracks the Dynamic Energy Exploration and Production Intellidex index, holding 30 stocks in its basket. It is pretty well spread out across various securities as none of these holds more than 5.51% share. It is the high cost choice in the space, with 0.64% in expense ratio. The ETF has AUM of $101.8 million and trades in a low volume of nearly 26,000 shares per day. It has a Zacks ETF Rank of 4 or ‘Sell’ rating with a High risk outlook. Technology After energy, the technology sector has been on a tear with stocks like Amazon (NASDAQ: AMZN ), Alphabet (NASDAQ: GOOGL ) (NASDAQ: GOOG ), Netflix (NASDAQ: NFLX ), Microsoft (NASDAQ: MSFT ), Linkedln (NYSE: LNKD ) and Facebook (NASDAQ: FB ) delivering outstanding performances on the back of a string of solid earnings’ reports. PowerShares Nasdaq Internet Portfolio (NASDAQ: PNQI ) is the top performer in this space, having returned 13.7% so far in the quarter. The fund targets the Internet corner of the broad technology space by tracking the Nasdaq Internet Index and charges 60 bps in fees per year. With AUM of $223.2 million, it holds a basket of 94 securities with concentration on the top five holdings at around 40.9% share. The fund trades in a light volume of around 21,000 shares a day. In terms of industrial exposure, Internet software and services makes up for 57% share, followed by Internet retail (38.1%). PNQI has a Zacks ETF Rank of 2 or ‘Buy’ rating with a High risk outlook. Materials The material sector has been gaining strength especially on its chemical business while metals & mining and steel are still struggling. Growing automotive and residential construction market as well as increasing production is lifting the sector as a whole. That said, iShares U.S. Basic Materials ETF (NYSEARCA: IYM ), having a Zacks ETF Rank of 4 and a High risk outlook, has gained 12.7% so far in the final quarter of 2015. The ETF tracks the Dow Jones U.S. Basic Materials Index and holds 54 stocks in its basket. The top two firms – DuPont (NYSE: DD ) and Dow Chemical (NYSE: DOW ) – dominate the fund’s return with over 10% share each while the other firms hold no more than 7.51% of assets. The fund has AUM of $365 million and charges 43 bps in fees and expenses. Volume is good as it exchanges around 108,000 shares in hand a day. The product is heavily skewed toward the chemical segment, as it makes up for more than three-fourths of the portfolio while steel, forestry & paper, metals & mining receive minor allocations. Biotech After a brutal sell-off in the third quarter, the biotech sector rebounded strongly thanks to attractive valuations, strong earnings growth, and encouraging industry trends. In addition, biotech stocks got a boost from its defensive nature, as these act as safe havens in times of political or economic turmoil. Though most of the biotech ETFs have provided handsome returns, BioShares Biotechnology Clinical Trials Fund (NASDAQ: BBC ) is leading the way higher, gaining in double-digits so far this quarter. This ETF has a novel approach to biotechnology investing as it provides exposure to the companies that have a primary product in Phase I, II, or III of FDA trials by tracking the LifeSci Biotechnology Clinical Trials Index. Holding 90 stocks in its basket, the fund is widely spread out as each firm holds less than 2.3% share. The fund has accumulated $24.7 million in its asset base and charges a higher annual fee of 85 bps per year. It trades in a light volume of 23,000 shares a day and has a Zacks ETF Rank of 3 or ‘Hold’ rating. Original Post

Paris Attack Put These Sector ETFs In Watch

Friday the thirteenth made itself literal in Paris when it encountered the worst terror attack in Europe in over a decade. A chain of Islamic State-backed terrorist attacks killed around 130 people in the city and left hundreds injured that night. As a payback and pledge to establish a terror-free world, France launched several air raids and bombed Islamic State targets – especially in Raqqa – in Syria. This was the most hostile anti-terrorism strike by France against this Islamic group ISIS. As expected, the entire risk-pro global investing backdrop took a beating after the annihilation and is yet to return to its prior shape. However, among all asset classes and sectors, there are a few which stand to gain from this horrible incident, while other are likely to be badly hit. Below we highlight some sectors which are in focus after the Paris attack. Defense The defense sector should benefit from France’s retaliation to ISIS in Syria. Along with the terror-stricken France, several of its western allies shared this mission. Washington has strengthened its strikes in ISIS-heavy regions and destroyed 116 ISIS oil trucks in Eastern Syria. Russia also joined hands with the West, probably to show vengeance against its plane crash in Egypt. The Islamic State of Iraq and the Levant’s Sinai Branch had taken responsibility of this incident. Defense stocks gained post Paris attack on November 13 and might see further expansion as such geo-political risks are favorable for weapon manufacturers and defense contractors. In any case, defense stocks have tested all-time highs ever since the ‘ rise of Islamic State in Iraq and Syria.’ Since the major global superpowers are likely to pursue an combined attack against ISIS militants, investors should watch aerospace and deference ETFs, namely iShares US Aerospace and Defense ETF (NYSEARCA: ITA ), SPDR S&P Aerospace & Defense ETF (NYSEARCA: XAR ) and PowerShares Aerospace & Defense Portfolio (NYSEARCA: PPA ) for gains. Cyber Security Cyber security is a red hot area at present. While technology has been a great boon to mankind, it has lugged with it the ills of ‘cyber-crime’. Enterprises and government agencies constantly face cyber-attacks and are always in the want of rigorous cyber security to keep hackers at bay. Several government databases store susceptible national information that should be kept safe from terrorist invasion. After the serial Paris assault avoided the eye of national intelligence, the need for enhanced security both online or offline has become a prerequisite. In fact, the topic trending the most now is whether governments should have access to technology that preserves the confidentiality of people’s ‘communications and transactions’, for the sake of national security . Needless to say, these talks would put cyber security stocks and the related ETFs, namely PureFunds ISE Cyber Security ETF (NYSEARCA: HACK ) and First Trust NASDAQ CEA Cybersecurity ETF (NASDAQ: CIBR ) in focus in the coming days. Hospitality Since tourism and hospitality sectors are hit hard when a terror attack takes place in a certain place, France will also bear the same fate. Not only France, big American and European cities which are basically the soft targets of ISIS might see a fallback in their tourism and hotel industry. Notably, the tourist industry accounts for about 8% of the French economy. Thanks to this fear for tourism, already big U.S.-based hotel chains that have considerable exposure in Europe as well, witnessed a retreat in their share prices. Starwood Hotels & Resorts Worldwide Inc. (NYSE: HOT ), Marriott International Inc. (NASDAQ: MAR ), Hyatt Hotels Corporation (NYSE: H ) and Wyndham Worldwide Corporation (NYSE: WYN ) lost about 7%, 5%, 3.6% and 5%, respectively, in the last five days (As of November 17, 2015). Not only hotels, since travelers are likely to abandon cruise trips, the apprehensive stocks of Carnival Corporation (NYSE: CCL ) and Royal Caribbean Cruises Ltd. (NYSE: RCL ) shed about 5% each in the last five trading sessions. Notably, consumer discretionary ETF PowerShares DWA Consumer Cyclicals Momentum Portfolio (NYSEARCA: PEZ ) invests over 25% in Hotels, Restaurants & Leisure and over 11% in Airlines, while another product PowerShares Dynamic Leisure and Entertainment Portfolio (NYSEARCA: PEJ ) invests about 5% each in Carnival and the online travel company Expedia (NASDAQ: EXPE ), and about over 10% in two airlines. Investors might thus view these two ETFs for potential losses. Airlines Needless to say, lower tourism means lower air travel. Though the impact of the attack is likely to be short-lived, travelers might take some more time to get back to their previous euphoria, shrugging off all fears. The Russian plane crash in October also point to this fact. The pure play Airline ETF U.S. GLOBAL JETS ETF (NYSEARCA: JETS ) could thus see losses in the coming days. JETS lost over 2.6% in the last five days (as of November 17, 2015). Original Post