Exchange traded funds tracking global stocks and precious metals were down heavily to open the week on lingering worries European leaders aren’t doing enough to check the sovereign debt crisis.
SPDR Dow Jones Industrial Average ETF (NYSEArca: DIA) fell 1.4% as the Dow shed nearly 200 points.
In metals, SPDR Gold Shares (NYSEArca: GLD) and iShares Silver Trust (NYSEArca: SLV) both slipped about 3%.
Gold prices fell below $1,700 an ounce and were on track for their biggest decline in three months.
“In the last month, holdings at the largest gold-backed exchange-traded products have risen by nearly 1.2 million ounces, largely in response to concern over the slow progress in solving the Eurozone debt crisis,” Reuters reported.
Stocks and precious metal ETFs were hurt by a rising dollar on Monday. PowerShares DB US Dollar Index Bullish (NYSEArca: UUP) added 1%.
Last week, the European Central Bank cut its key interest rate and announced liquidity measures designed to help banks.
“The reality is that the European debt crisis will only be over when private investors are happy to buy the bonds of any Euro Zone nation at a reasonable interest rate and European economies are growing again,” said David Kelly, chief market strategist at JP Morgan Funds.
“To get this point, European nations will need to commit to achieving fiscal balance in the long-run, achieving economic growth in the short run, provide a pan-European guarantee that all buyers of sovereign debt will be paid in full and on time, and charge the ECB with intervening massively in debt markets in the short-run to hold yields to reasonable levels,” he added in a weekly outlook. “Despite an initially positive market reaction, we are no closer to this end goal than we were a week ago, and European markets could have a tough time this week as this reality sinks in.”
Full disclosure: Tom Lydon’s clients own GLD and SLV.
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