Exchange traded funds (ETFs) are mixed in early trading as investors await the White House’s budget details and express concern about inflation fears in Europe.

  • The Obama administration’s budget proposal for fiscal 2012 carries a price tag of $3.7 trillion, down from the $3.8 trillion he had proposed for the current 2011 fiscal year, and calls for scaling back or eliminating more than 200 government programs, according to The Washington Post. The Pentagon is the target of some cuts, which has sent PowerShares Aerospace & Defense (NYSEArca: PPA) down by nearly 1% in early trading.
  • Europe’s main stock markets mostly fell on Monday despite gains in Asia on an easing of political tensions in Egypt as markets digested mixed economic data, especially signs of inflation pressures. Traders said recent sustained gains left stocks vulnerable, with concerns over inflation emerging to provide a ready excuse to sell as investors consolidate positions. The ProShares Ultra MSCI Europe ETF (NYSEArca: UPV) is down slightly in early trading.
  • Japan confirmed Monday that China’s economy surpassed its own as the world’s second largest in 2010 and said a late-year down-turn was its first quarterly contraction in more than a year. The historic shift underscores a stark change in fortunes for the two countries: China is growing rapidly and driving the global economy, while Japan never fully bounced back from the stagnation that followed the bursting of its property bubble. iShares MSCI Japan (NYSEArca: EWJ) is up slightly so far today, continuing a slight uptrend that has taken place in recent months.
  • Analysts at J.P. Morgan Chase on Monday downgraded shares of Wal-Mart Stores Inc. (NYSE: WMT) to neutral from overweight and said the firm’s recent same-store sales deterioration, “could be a secular problem that could last multiple years.”  The Consumer Staples Select Sector SPDR (NYSEArca: XLP) is down this morning; Wal-Mart is 9% of the fund.

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.