Crisis In Japan, Economic Data Move ETFs

March 16th at 2:30pm by Tom Lydon

The crisis in Japan along with disappointing economic data drove markets and exchange traded funds (ETFs) lower.

  • Fears over Japan’s nuclear crisis sent U.S. stocks tumbling, as evacuation warnings spurred investor worries of meltdowns and a radiation catastrophe. As the crisis mounted, the U.S. Embassy warned American citizens living within 50 miles of a crippled Japanese nuclear plant to evacuate or seek shelter.  The U.S. nuclear chief said radiation levels were “extremely high” at one of the reactors and recommended evacuations within a “much larger radius” than Japan’s government has called for. Traders said the market’s jumpy reaction to officials’ comments and warnings underlined the deep anxiety among investors. The ProShares UltraShort MSCI Japan ETF (NYSEArca: EWV) ended the day almost 8% higher.
  • Producer prices surged in February at their fastest pace in 1-1/2 years; data showed on Wednesday, a day after the Federal Reserve said it had a watchful eye on inflation pressures. Economists said the jump in food and energy costs that drove the U.S. producer price index higher last month would likely steal from other spending and slow growth. “I don’t believe that this is a general rise in prices across the board, it’s not the stuff of an inflationary spiral, but you are starting to have some pricing pressures,” said Brian Levitt, an economist at OppenheimerFunds in New York.
  • The dollar dropped against the yen to its lowest point in almost 16 years Wednesday amid a nuclear crisis in Japan, debt woes in Europe, tension in the Middle East and weak economic reports at home.  It is now close to its lowest point of the post-World War II era — 79.75 yen struck in April 1995.  Many analysts said they expect the Bank of Japan to try to weaken the yen if the dollar drops below 80 yen. A strong yen hurts the Asian country’s exports, potentially deepening any hit to the economy from the earthquake and lingering nuclear crisis. “It’s safe to assume that no one in Japan wants to see dollar-yen trade much below 80 and certainly not below 79.75,” said David Gilmore of Foreign Exchange Analytics in Essex, Conn. The PowerShares DB U.S. Dollar Index Bullish ETF (NYSEArca: UUP) ended the day slightly higher.
  • Gold futures settled marginally higher Wednesday, at $1,396.10 an ounce, closing below $1,400 for the second consecutive session. Earlier in the day, gold had traded as high as $1,406.60 an ounce. Gold started trimming its early advance after U.S. and European stocks fell sharply, a move tied to reported comments by Guenther Oettinger, the European Union’s energy commissioner, about the situation at Japan’s crippled nuclear-power plant. The commissioner told a European Parliament committee that the site was “out of control,” according to news reports. The Market Vectors Gold Miners ETF (NYSEArca: GDX) was down over 2% at days end.

Gregory A. Clay contributed to this article

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.