ETF Outlook For Tuesday, June 3, 2014 (FXI, FXE, DXJ, EWZ)
ETF Outlook for Tuesday, June 3, 2014:
iShares FTSE/Xinhua China 25 Index ETF (NYSE: FXI)
The May HSBC manufacturing PMI rose to a four-month high last night in China when it came in at 49.7. A reading above 50 represents expansion and the May number is getting close to that level once again.
However, with a reading below the 50.00 level, it does open the door to stimulus from the government, which would be a boost to the stock market. FXI closed at the best level since the first day of January on Monday and has become one of the strong country ETFs in the last month.
Rydex CurrencyShares Euro ETF (NYSE: FXE)
The unemployment rate in the eurozone fell to 11.7 percent from 11.8 percent, but remains near the high as the region has struggled to create new jobs after the financial crisis. The inflation reading in the region came in below expectations suggesting there is plenty of room for the ECB to make a move later this week.
Further stimulus would be positive for stocks and lower the value of the euro. Shares of FXE are already trading near a multi-month low, but will find some support at the $133 area.
WisdomTree Japan Hedged Equity ETF (NYSE: DXJ)
A surge in the value of Japanese stocks combined with a weak Japanese yen had DXJ on the move Monday. The ETF that is long Japanese stocks and short the yen finished the session up 1.6 percent at the best close since March.
The ETF has been consolidating for the last year a big rally as the Japanese stock market began to rally with the fall of the yen in late 2012. It appears Abenomics, which has been holding down the yen, is here to stay and that should benefit DXJ as the currency falls and Japanese stocks rise.
iShares MSCI Brazil ETF (NYSE: EWZ)
The country that is prepping to kick off the 2014 World Cup is once again struggling with three consecutive losing sessions. EWZ closed at the lowest level in six weeks as investors remain concerned about the struggling economy.
Hopes of a pickup from the influx of visitors due to the World Cup are beginning to subside and if EWZ cannot hold above the $46 area it would signal a major technical breakdown and send the ETF much lower.
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