ETF Trends
ETF Trends

Exchange traded funds (ETFs) edged down at the open on Wednesday as concerns over debt issues in the Euro zone, Japan’s nuclear crisis and violence in the Middle East and North Africa persisting.

  • Japan’s government said the cost of the earthquake and tsunami that devastated the northeast could reach $309 billion, making it the world’s most expensive natural disaster on record. The extensive damage to housing, roads, utilities and businesses across seven prefectures has resulted in direct losses of between 16 trillion yen ($198 billion) and 25 trillion yen ($309 billion), according to a Cabinet Office estimate Wednesday. The figure is considerably higher than other estimates. The World Bank on Monday said damage might reach $235 billion. Investment bank Goldman Sachs had estimated quake damage would be as much as $200 billion. Japan’s estimate does not include the impact of power shortages triggered by damage to a nuclear power plant, so the overall economic impact could be even higher. It also leaves out potential global repercussions. The ProShares UltraShort MSCI Japan ETF (NYSEArca: EWV) is up over 3% already today.
  • Crude futures moved higher into the $105-a-barrel range Wednesday, after the previous session’s strong gains as investors’ monitored turmoil in Libya and other parts of the Middle East. The advance came as coalition forces continued their air attacks on troops loyal to Libyan leader Col. Moammar Gadhafi. Fears remained about the North African country’s oil production, despite assurances from Saudi Arabia that the world’s largest oil supplier would meet any supply shortfall resulting from the turmoil in Libya. Unrest in Yemen and Syria also added to geopolitical worries. “Events this week in Libya make it increasingly unlikely that we’ll see a swift normalization of Libyan crude oil production in the near term,” said Deutsche Bank analyst Soozhana Choi in a note to clients. The US Commodity Oil Fund (NYSEArca: USO) is up slightly on Wednesday.
  • Stocks in Europe edged up on Wednesday, brushing aside an earlier retreat in Japan and renewed debt crisis jitters as investors looked to a stronger open on Wall Street. However, market sentiment remained fragile and vulnerable to developments in Japan’s struggle to contain radiation from a leaking nuclear power plant and the international military strikes in Libya. In addition, jitters over Europe’s debt crisis have resurfaced ahead of a meeting of EU leaders in Brussels on Thursday and Friday, with investors particularly worried about the fate of Portugal and Ireland. Portugal’s government is likely to fall following an expected defeat in a Parliament vote later Wednesday and the new Irish government is showing few signs of backtracking on its commitment to a super-low corporate tax rate, meaning it is unlikely to get easier terms for its bailout loans. Against that backdrop, investors are refocusing on Europe’s debt crisis after a couple of weeks when most attention has been centered on North Africa and Japan. The Vanguard MSCI Europe ETF (NYSEArca: VGK) is flat in early trading.
  • Bank of America said Wednesday the Federal Reserve has objected to its plan for raising its dividend in the second half of this year, a setback that suggests regulators need to see more evidence that the nation’s largest bank is strong enough to weather another recession. But the bank said in a regulatory filing that it’s been given another opportunity to submit a comprehensive plan to the Fed so that the central bank may reconsider its decision. The Charlotte, N.C., bank expects to resubmit a request to dole out a higher second-half dividend. Last week, the Fed cleared the way for major lenders to increase their dividends if they passed “stress tests” to see if they are strong enough to stand up to another economic downturn. Banks had been forced to cut dividends to preserve cash following the financial crisis that peaked in late 2008. It was a condition of the government’s bank bailout package. All of the 19 largest banks overseen by the Fed were subject to the tests. By increasing dividend payments, banks may be able to attract new investors, which should lead to more lending. The Fed has said it is taking a “measured and conservative approach” on banks’ dividend requests. The Direxion Daily Financial Bear 3X Share ETF (NYSEArca: FAZ) jumped almost 4% early Wednesday.

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.