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SPDR University Latest Commentary-Weekly Market Report-August 9, 2013
August 9, 2013--ECONOMIES: The trade deficit narrows sharply in the US. Home prices continue to rise in Canada. The Old Lady provides more forward rate
guidance. Further signs of improvement in the eurozone. The BoJ leaves policy unchanged, while the RBA eases.
MARKETS: Equities were generally offered, but with little conviction. Bonds little changed outside of Japan and Aussie. USD was widely
offered, while GBP caught an impressive bid. Oil offered on higher refinery rates.
THE WEEK IN REVIEW
US
After slipping over the last four months, non-manufacturing activity
rebounded sharply in July, regaining all the ground lost since
February. The NON-MANUFACTURING PURCHASING MANAGERS’ INDEX
(PMI) jumped 3.8 points to 56.0, comfortably above the 50.0 mark
that differentiates between expansion and contraction. Large gains
in business activity and new orders easily offset modest declines
in inventories and employment. So far, the July data have been
decidedly mixed, with employment disappointing and car sales
slipping slightly, but jobless gains improving and the two PMIs
jumping into the mid-50s. The best interpretation may be that while
July will be a lackluster month, momentum will pick-up as the third
quarter progresses.
NEXT WEEK PREVIEWED
SPOTLIGHT: Housing starts should regain traction in the US. The eurozone recession should finally end. Japanese GDP is expected to rise robustly for the second consecutive quarter.
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Source: SSgA
CFTC.gov Commitments of Traders Reports Update
August 9, 2013--The updated current reports for the week of August 6, 2013 are now available.
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Source: CFTC.gov
FRB Working paper-Are Leveraged and Inverse ETFs the New Portfolio Insurers?
August 9, 2013--Abstract: This paper studies Leveraged and Inverse Exchange Traded Funds (LETFs) from a financial stability perspective. Mechanical positive-feedback rebalancing of LETFs resembles the portfolio insurance strategies, which contributed to the stock market crash of October 19, 1987 (Brady Report, 1988).
I show that a 1% increase in broad stock-market indexes induces LETFs to originate rebalancing flows equivalent to $1.04 billion worth of stock. Price-insensitive and concentrated trading of LETFs results in price reaction and extra volatility in underlying stocks. Implied price impact calculations and empirical results suggest that they contributed to the stock market volatility in the 2008-2009 financial crisis and in the second half of 2011 when the European sovereign debt crisis came to the forefront. Although LETFs are not as large as portfolio insurers of the 1980s and have not been proven to disrupt stock market activity, their large and concentrated trading could be destabilizing during periods of high volatility.
view the FRB Working paper-Are Leveraged and Inverse ETFs the New Portfolio Insurers?
Source: FRB
SEC Issues Risk Alert On Options Trading Used To Evade Short-Sale Requirements
August 9, 2013--The Securities and Exchange Commission today issued a Risk Alert to help market participants detect and prevent options trading that circumvents an SEC short-sale rule.
The SEC’s Office of Compliance Inspections and Examinations (OCIE) issued the alert after its examiners observed options trading strategies that appear to evade certain requirements of the short-sale rule. The alert describes the strategies used by some customers, broker-dealers and clearing firms, summarizes related enforcement actions, and notes practices that some firms have found to be effective in detecting and preventing trading intended to evade the rule, known as Regulation SHO.
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Source: SEC.gov
iShares Launches The iShares Dow Jones-UBS Roll Select Commodity Index Trust
August 9, 2013--BlackRock, Inc. (NYSE: BLK) announced today that its iShares Exchange Traded Funds (ETFs) business, the world's largest manager of ETFs 1, has launched the iShares Dow Jones-UBS Roll Select Commodity Index Trust (NYSE Arca: CMDT) on the NYSE Arca.
It is the first exchange traded product based on the Dow Jones-UBS Roll Select Commodity Index, which currently tracks 22 commodities futures contracts, including agriculture, energy and metals, and is designed to minimize the costs of closing expiring futures contracts and replacing them for new ones.
"Many investors look to commodities to diversify beyond stocks and bonds, but when investing in commodity funds that typically hold futures contracts, the buying and selling of contracts can detract from fund performance. By using an innovative index the iShares Dow Jones-UBS Roll Select Commodity Index Trust seeks to minimize the costs of changing or 'rolling' futures contracts, enabling the Trust to ultimately provide investors efficient access to diversified commodities," said Ravi Goutam, Head of Americas Product for iShares at BlackRock.
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Source: BlackRock
Cash lure to stop firms deserting ETFs
August 8, 2013--On Wall Street, it seems money talks. Three years after the "flash crash" that sent prices of exchange traded funds reeling,
US stock exchanges say they have worked out a way to motivate the financial firms that are supposed to ensure smooth trading in ETFs: pay them more....
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Source: FT.com
New US listings at post-crisis high in Q3
August 8, 2013--The market for new US listings is off to its best third-quarter start since before the financial crisis, highlighting the rush of companies looking to take advantage of steadily rising stock prices and limited turbulence on equity exchanges.
A total of 28 companies have raised $5.2bn from US initial public offerings since July, which marks the fastest rate of activity and amount raised in the same period since 2007, according to data from Dealogic. A further six companies are looking to price deals and begin trading by the end of this week.
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Source: FT.com
Coming Soon: Index ETFs That Follow Secret Indexes
August 8, 2013--Exchange-traded funds (ETFs) that follow indexes are about to meet a new competitor.
Soon there will be self-indexed ETFs that don’t follow any published index. They're secret. Only the fund providers themselves will know how the index is constructed-and what’s in it – even though the ETFs will be marketed as passive indexing.
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Source: Forbes
BNY MELLON DR INDICES Monthly Performance Update July 2013
August 8, 2013--The BNY Mellon ADR Index Monthly Performance-July 2013 Update has been published and is now available for review.
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Source: BNY Mellon
Schwab to launch six ETFs based on Russell fundamental indexes
August 8, 2013--Charles Schwab Corp said on Thursday it plans to launch six new exchange-traded funds, which will begin trading next week, as the online brokerage looks to expand its offering of in-house managed ETFs.
The new funds, which are based on the Russell fundamental index series, bring Schwab's proprietary ETF lineup to 21 total funds. Schwab first began offering in-house managed ETFs in late 2009 and in February unveiled a new commission-free platform to waive transaction fees on 105 ETFs offered by multiple providers.
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Source: Reuters
