Trending on ETF Database: Central Banks Are on Everyone's Radar

Our Euro ETF page has registered an increase in viewership of 74% since last week. Although all currencies will see some interest from investors when central banks are making decisions on interest rates, this number seems to stand out the most. Most of the activity to our page may be to investigate the performance of the best-known euro-tracking ETF, (FXE B), although there are several other European currency ETFs, including (ULE B+). FXE is up over 4.29% year to date, while ULE is up over 8.30% year to date. FXE is currently in the middle of the trading range it entered at the end of last year. With resistant levels noted at approximately 110 while the support appears to be 106; the current price is just over 108.

The overriding theme of interest in the top ETFs this week centers around Mario Draghi and the ECB. At their meeting last week, the ECB attempted to surprise the market with a major new initiative to revive the struggling European economies. The ECB will use several strategies to lift the market, including a new QE initiative, which includes buying corporate bonds as well as incentives for banks to lend to the “real” economy. The amount of QE has also been increased from €60 million ($67.9 million) to €80 million ($90.5 million) per month.

As the euro has seen renewed interest this past week, so too have European equities. Our Europe Equities ETFs page recorded an increase in traffic of 45%. The renewed interest in European equities ETFs is all related to the ECB. There are many such ETFs to trade, but one of the best-performing and largest by assets is (HEDJ B). However, HEDJ is actually down 2.79% year to date, as are fellow Europe ETFs (VGK A) and (IEV A-), which are down 1.57% and 1.04%, respectively.

As stated above, European equities and all institutions that fall under the ECB have seen extensive interest over the last week. With the ECB looking to reignite its economies, it is trying to do everything it can to help European equities, such as buying corporate debt, decreasing interest rates, and even toying with the idea of paying banks to lend money out to borrowers. However, after the bank initiated this new program, Draghi made an error in how he communicated the move to the markets. The initial euphoria of the markets from this action was soon dampened when Draghi stated that the ECB “doesn’t anticipate that it will be necessary to reduce rates further.”

It is fitting and understandable that the largest economy in Europe would see renewed interest in ETF viewership after the ECB’s actions this week. As such, our Germany ETFs page saw a 34% increase in traffic over the last week. Germany ETFs did show an increase in value over the last few days, however, most ETFs remain in negative territory year to date. (EWG B), the largest and premier ETF for the German market, is currently down 0.61% year to date. At the same time, over the last month we have seen a significant recovery as the ETF may have possibly found a bottom.

As part of the group of ETFs that monitor European markets, the German ETFs will be the most active as that country is still the largest economy in Europe. Renewed interest in these ETFs could be caused by the idea that the ECB is attempting to rescue the European markets from their malaise. The holdings of the largest German ETF, EWG, are diversified as well as partially positioned to take advantage of lower interest rates. Companies in most sectors can benefit by borrowing at lower rates and expanding their businesses.

Somewhat surprisingly, our Canada ETFs page was among the most active this past week. Our page recorded an increase in traffic of nearly 23%. The increased interest was somewhat surprising as there were few notable newsworthy items to drive traffic to the page. In any case, (EWC A-), the largest Canada ETF, is up nearly 7% year to date. The question is whether the ETF’s performance is drawing the attention or whether it’s something in the underlying Canadian economy.

Perhaps the reason for the interest has to do with increased oil prices. Canada’s economy is highly dependent on oil exports and oil prices are reaching breakeven prices for Canadian oil companies. Another thing to consider is the manufacturing sales increase of 2.3% in January, which reaches $53 billion.

The Japanese markets have remained in a deflationary malaise for the last two decades. It is interesting to note then that our Japan ETFs page has seen a nearly 23% increase in viewership over the last week. The best-known Japan ETF is (EWJ A). This ETF is mirroring the decline of the Japanese markets as it is down nearly 3.65% year to date.

This past week saw some speculation that the Bank of Japan might actually surprise the market. Speculation seemed to center around the leaders of the BoJ as they continue to support their idea that they will do whatever it takes to defeat the deflationary spiral Japan has been suffering for the last two decades. On Wednesday, BoJ Governor Haruhiko Kuroda said that cutting rates further into negative territory, to around -0.5%, is possible. No action has been taken yet, but this is something to keep an eye on in the next BoJ press conference.

The resounding theme of this week’s ETF interest seems to be the ECB and central banks in general. Three major banks held meetings, which possibly drove traffic to their respective pages. The ECB initially appeared to have re-energized the European markets, but, as mentioned, Mario Draghi dampened the enthusiasm by stating that the ECB would not likely cut rates further. Further, with the Bank of Japan holding all operations in check, investors might have been putting the cart before the horse in the expectation that something significant would come out of that country. Lastly, the Fed kept interest rates the same and reduced the expected number of rate increases to only two this year.

By analyzing how you, our valued readers, search our property each week, we hope to uncover important trends that will help you understand how the market is behaving so you can fine tune your investment strategy. At the end of the week, we’ll share these trends, giving you better insight into the relevant market events that will allow you to make more valuable decisions for your portfolio.