Euro-Stocks Correlation Continues
Bob Pisani is off; this post was written by CNBC producer Robert Hum.
The strong correlation between the euro and stocks continues to hold. Stocks briefly touched below their February intraday lows shortly after the open. However, they have halved their losses as the euro has retraced some of its earlier losses, sitting now at its session high.
While European markets closed off their lows too, many are still sitting at multi-month lows:
Greece: 14-month low
Spain: 12-month low
France: 10-month low
Italy: 10-month low
Ireland: 10-month low
U.K.: 8.5-month low
Germany: 3-month low
Additionally, with the declines today, a handful of European benchmark indices have re-entered bear market territory. Spain’s Ibex 35, Portugal’s PSI 20, and Italy’s MIB Index are all down more than 20 percent since their highs in April.
As overseas markets have dropped sharply, so have many of the major international ETFs, whose steep declines have severely underperformed the U.S. markets over the past month. With dampening global growth expectations, investors have specifically turned away from emerging markets such as Brazil, China, and Russia, and even commodity-driven countries like Australia. Traders note that these ETFs have seen a jump in volume over the past month, and are seeing solid activity again today.
Since April Highs:
Market Vectors Russia down 28 percent
iShares MSCI Australia down 26 percent
iShares MSCI Brazil down 23 percent
iShares MSCI Emerging Markets down 19 percent
SPDR S&P China down 17 percent
For more on how ETFs can play a role in an investment portfolio, check out our newly-launched Model ETF Portfolios page (also linked right below the Trader Talk logo at the top of this page). There, three leading ETF experts show how an investment portfolio can be created based on different investment strategies using just ETFs. More information on holdings, returns, trades, and commentary for the six ETF portfolios are located on that page.
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