Germany ETFs Try to Endure Italy Chaos
This article was originally published on ETFTrends.com.
The iShares MSCI Germany ETF (EWG) , the largest exchange traded fund tracking German equities listed in the U.S., and the Xtrackers Germany Equity ETF (Cboe:GRMY) are among the Germany ETFs that could be in focus amid rising economic in political chaos in Italy.
Germany is the Eurozone's largest economy while Italy is the third-largest economy in the region. Italian equities and the corresponding ETFs plunged Tuesday. The sudden distaste for Italian assets intensified on worries that the Eurozone’s third largest state could exit the bloc and may even trigger further breakdown in the euro currency union. Some traders belief German stocks could be headed lower as a result of the calamity in Italy.
“Political turmoil in Italy has TradingAnalysis.com founder Todd Gordon betting on a drop for another key European market: Germany,” reports CNBC.
Somber Mood
With speculation intensifying that Italy could be departing the European Union, politics there are front-and-center.
“ Whether it’s going to be called Itexit, Italexit or Quitaly, the prospect of Italy leaving the Euro is fast becoming a topic of conversation, not just in the cafes of Rome’s piazzas, but all across the globe,” said Murray Gunn, head of Research at Elliott Wave International. “The country’s populist coalition wanted to appoint a euroskeptic as finance minister, but the Italian President blocked the move. Now looms the prospect of fresh elections which, given the fault lines, would no doubt be waged as a de-facto referendum on Italian membership in the Euro. Italy’s future in or out of the Euro will depend in large part on social mood.”
Entering Wednesday, EWG was down nearly 6% over just the past week. The $3.84 billion ETF holds 66 stocks, including a nearly 19% tilt to consumer discretionary names. Materials and financial services stocks combine for almost 35% of the fund's weight.
“ On a chart of the S&P 500 and the EWG, Gordon points out that EWG is coming down to retest the $31 level for a third time,” reports CNBC. “According to Gordon, a third retesting of this level means EWG could likely break below $31.”
GRMY seeks to track the Nasdaq Germany Large Mid Cap Index, which is designed to track the performance of the German equity market.
For more information on European markets, visit our Europe category.
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