Courtesy of John Nyaradi.
Friday the 13th Unlucky for Euro ETFs as S&P Downgrades Europe
A description of Friday the 13th bad luck should start with the slew of downgrades from Standard & Poors. S&P downgraded France and Austria from AAA to AA+, Spain became a AA, Italy became a BBB+, and Portugal received a BB. These downgrades come after the ratings agency placed nearly 15 countries in the Eurozone on close “credit watch” in the last quarter of 2011.
Euro ETFs responded accordingly, as the iShares MSCI France Index ETF (NYSEARCA:EWQ) lost over 2%, the iShares MSCI Spain Index ETF (NYSEARCA:EWP) lost just under 1.5%, and the iShares MSCI Italy Index ETF (NYSEARCA:EWI) lost 2.35% in today’s trading. German ETFs also suffered, despite the fact that Germany has not been downgraded (yet), as the iShares MSCI Germany Index Fund ETF (NYSEARCA:EWG) lost 2.44%. And, while we are here, let us not forget the Vangaurd MSCI Europe ETF (NYSARCA:VGK) dropping nearly 2%, or the CurrencyShares Euro Trust (NYSEARCA:FXE) losing nearly 1.15%.
It looks like Europe really took Friday the 13th to heart, or at least S&P took Friday the 13th to heart, as this ratings agency just doesn’t seem to understand that excessive downgrades will not stop investors from buying government bonds nor will excessive downgrades push policymakers to fix the overwhelming problems of sovereign debt. If anything, borrowing rates have become cheaper, as we have witnessed several record setting auctions of US T-bonds in the last few weeks.
Ironically too, Gold ETFs (NSYEARCA:GLD) finished up low today as well (near 1% drop), which indicates to me that the “fiats” are still in vogue despite the slew of downgrades.
And lastly, to place the cherry on top of Friday the 13th’s desert, JP Morgan reported a 23% drop in quarterly earnings, while financial ETFs such as NYSEARCA:XLF and NYSEARCA:IYF dropped over half a percent each.
Like I said yesterday, “the bulls are high on hope, the bulls are actually “in charge,” all of our problems still exist, or all three, but something (or two somethings) will likely have to give sometime.”
It looks like for today, Friday the 13th (oh the irony), “the bulls are high on hope” notion gave way. However despite the fact that Europe’s problems are far from fixing, it is likely that today’s slew of downgrades are just apart of another S&P rampage, and technical indicators still place the bulls “in charge” heading into the New Year.
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