ETF Trading Report: South Africa, Yen ETFs in Focus

Eric Dutram

Stocks surged in Thursday trading as a solid jobs report and an accommodative stance from the ECB led to broad buying in the markets. Jobless claims came in below expectations while the ADP report crushed predictions, showing that 52,000 more jobs were created in the month than the consensus was projecting.

Meanwhile in Europe, Draghi had a much-awaited press conference in which the central bank President announced an open-ended bond buying campaign in order to help troubled peripheral states get their economies back in order. Still, the program will have some conditions attached, will be ‘sterilized’, and there was not an interest rate cut, suggesting that the bank still has some tools at its disposal if these latest measures don’t boost the struggling economies of Europe (see ETFs for the Most Competitive Countries on Earth).  

These news items helped to send the Dow higher by 1.9% while the S&P 500 added just over 2% and the Nasdaq surged by nearly 2.2% on the session. European markets did even better on the day as the French benchmark added over 3% while Italian and Spanish benchmarks rose, respectively, 4.3% and 4.9% in Thursday trading.

Despite all the movement in the equity market, forex trading was pretty flat overall, although it did see some significant volatility. Nevertheless, the dollar lost about 0.2% against the world’s major currencies, led by a strong performance of the Aussie dollar against the greenback.

Yet while forex trading was flat, activity in the bond market was especially choppy. Italian and Spanish yields plunged—with Spanish 10 years hitting the 6.00% mark—while German and American bond yields both rose by eight basis points in Thursday trading (Read Invest like Mitt Romney with These Three ETFs).

The movement did transfer over into the commodity world, as precious metals saw some positive trading along with a few of the major grains as well. However, industrial metals and most of the major energy products were trading on shaky footing on the day, led by a 1.1% loss in natural gas and a 0.5% slump in the copper market.

Thanks in part to some actual market moving events, ETF trading was finally—and broadly—back above historical average levels. This was especially true in the international ETF market and in some commodity products as well, although large caps and a few sector-based U.S. products didn’t exactly see the most robust trading levels on the day.

In particular, ETF investors saw the CurrencyShares Japanese Yen Trust (FXY) trade on higher volume today, much like a number of other ETFs in the currency world. This fund saw volume that was roughly 4x its normal level, pushing the total shares changing hands well over the 650,000 mark (see Five Cheaper ETFs You Probably Overlooked).

The product did lose about 0.7% today as the solid jobs report helped to push investors back into dollars once more. The easy beat on the jobs front suggested to many that the American economy may be improving, helping to firm up support for the dollar, especially with the uncertainty hanging over the euro despite its new bond buying program. Given this, demand for yen was low today, although there was some volatility, pushing the product lower in Thursday trading.

Another ETF which saw an outsized level of volume was the iShares MSCI South Africa Index Fund (EZA). The product usually does about a quarter million shares in volume in a normal day but saw more than 1.7 million shares move hands in Thursday trading.

This boost in volume also came on an up day for the fund as a ‘peace accord’ was signed in the country between the strikers and the mining company. This helped to end the nearly four week long strike and assisted in taking some of the political risk off of the table for the nation, at least in the short-term (read Time for the South Africa ETF?).

The timing of the event couldn’t have been better either, as it came on a risk-on day for the markets, and one in which precious metals were again in vogue. Since South Africa is a risky emerging market and also a key producer of metals, it was a big beneficiary on the day, adding more than 4.3% on the session.

(see more in the Zacks ETF Center)

Read the analyst report on EZA

Read the analyst report on FXY

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