Market and ETF Reactions to Japan's Quake | ETF Trends

Exchange traded funds (ETFs) extended gains in afternoon trading Friday, helped by a bounce in shares of energy and material companies that could experience increased demand stemming from rebuilding efforts after a catastrophic earthquake and tsunami hit Japan.

  • U.S.-listed shares of Japanese companies and Japan-related ETFs moved mainly lower Friday as Japan reeled from a powerful 8.9-magnitude earthquake and several strong aftershocks. But the yen, an ETF that tracks the yen and an ETF that shorts Japanese stocks climbed. “At this stage, the situation is clearly very uncertain, and we are conscious that the direct human and economic costs could be very significant,” Peter Westaway, chief European economist at Nomura, said. “With every passing minute, the news of casualties and economic damages is escalating.” The ProShares UltraShort MSCI Japan ETF (NYSEArca: EWV) gained over 3% on Friday.
  • Reinsurance stocks dropped in the U.S. Friday after the earthquake sparked concern about heavy losses in the industry. But insurance brokerage shares rose amid hope losses from the quake would support property reinsurance prices in the future. Brian Meredith, an insurance analyst at UBS, said that losses from the Japan earthquake probably won’t be enough to trigger another hard market. “It is too early for accurate estimates of industry wide insured losses, but the typical spread of insurance losses globally appears likely,” he added. The SPDR KBW Insurance ETF (NYSEArca: KIE) closed slightly higher today.
  • Big jumps in U.S. oil refining shares on Friday in reaction to the earthquake could soon reverse as traders digest the impact of the disaster. Oil refiners soared, driving up U.S. stocks on Friday, after the earthquake disrupted Japan’s refining capacity, and analysts said rebuilding efforts could lift shares of equipment makers. Howard Ward, a fund manager at the GAMCO Growth Fund, said speculative moves would likely be a short-lived overreaction. “It’s generally a mistake for people to be too reactive to a natural disaster like this,” he said. The Direxion Daily Energy Bull 3x Shares ETF (NYSEArca: ERX) finished almost 5% higher on Friday.
  • Consumer sentiment fell to its lowest level in five months in early March as gasoline prices rose, a survey released on Friday showed. Even so, buying plans were largely unchanged and although the rate of real consumer spending will diminish, the report does not indicate a renewed downturn on the horizon, the latest consumer survey from Thomson Reuters and the University of Michigan said. The preliminary March reading on the overall index on consumer sentiment came in at 68.2, down from 77.5 in February. That was the lowest level since October 2010 and was well off the median forecast of 76.5 among economists polled by Reuters.

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.