Eurozone equities and region-related exchange traded funds bounced back Friday as bargain hunters pounced on a cheap opportunity following a steep sell-off on disappointing European Central Bank action.
On Friday, the iShares MSCI EMU ETF (NYSEArca: EZU) rose 0.8% and the SPDR EURO STOXX 50 (NYSEArca: FEZ) gained 0.9% after European stocks saw their worst daily lost since August yesterday on the lackluster ECB announcement. [Where Does Limp ECB Stimulus Leave Euro ETF?]
Despite the lighter-than-expected ECB stimulus package, the sell-off may have been overdone. Investors may have pushed up the Eurozone markets Friday after realizing that fundamental factors, like continued central bank easing, are still supporting the economy.
“The market overreacted to the ECB, but they’re still pumping in almost a third of a trillion euros into the economy over the next 18 months – that’s a lot of money,” Ben Kumar, an investment manager at Seven Investment Management, told Bloomberg.
Moreover, Euro-hedged ETFs, which diminish the negative effects of a stronger dollar or weaker euro currency, outpaced non-hedged Europe ETFs. On Friday, the Deutsche X-trackers MSCI EMU Hedged Equity ETF (NYSEArca: DBEZ) was up 2.0, iShares Currency Hedged MSCI EMU ETF (NYSEArca: HEZU) rose 1.8% and WisdomTree Europe Hedged Equity Fund (NYSEArca: HEDJ) gained 1.8%.
The hedged ETFs were outperforming as the U.S. dollar strengthened. The U.S. Dollar Index, which tracks the greenback against a basket of major currencies, rose 0.8% to 98.42. Meanwhile, the CurrencyShares Euro Currency Trust (NYSEArca: FXE) dipped 0.7% Friday as the euro fell 0.7% to $1.0868. [A Pivotal Month for U.S. Dollar ETFs]