This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

European ETFs: Return of the Debt Crisis

Stocks in this article: VGK EWG EWD

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage. The opinions expressed are those of the author and do not represent the views of TheStreet or its management.



NEW YORK ( ETF Expert ) -- Did you think it was over? Did you believe that the bailouts of Greece and Ireland had effectively put an end to the PIIGS challenge?

On a monthly momentum basis, Europe had been on a roll. And many market strategists had suggested that a fundamental shift from the macroeconomic eurozone picture to the microeconomic attractiveness of European corporations would keep European ETFs on a hot streak.

Well ... not so fast. We may have seen Greece and Ireland tap the bailout funds. However, Portugal, Italy and Spain are still having a tough time finding buyers for their government-issued bonds.

> > Bull or Bear? Vote in Our Poll

Specifically, the European Central Bank had to engage in a bit of "quantitative easing," after watching Portugal's 10-year yield catapult to a euro-era high of 7.63%. Analysts believe that any yield of more than 7% is unsustainable for Portugal. (Note: The ECB buying did move Portugal's 10-year back down to 7.29%.)

Nevertheless, the ongoing uncertainty over the size and scope of the eurozone's current bailout backing, not to mention Portugal's current unwillingness to admit to needing any help, has caused investors to back away from European ETFs.

Here's the tale of the tape (as of Feb. 10):

Portugal Debt Fears Smack European ETFs

  • Market Vectors Poland (PLND) is down about 2.3% over five days and up 3.8% over the past month.
  • iShares MSCI Spain (EWP) is down about 2.1% over five days and up 19.5% over the past month.
  • iShares MSCI Belgium (EWK) is down about 2.0% over five days and up 6.9% over the past month.
  • iShares MSCI Italy (EWI) is down about 0.4% over five days and up 15.0% over the past month.
  • iShares MSCI France (EWQ) is down about 0.6% over five days and up 10.6% over the past month.

  • By comparison, the S&P 500 Trust (SPY) is up about 1.1% over five days and up 3.7% over the past month.

The question investors have to address is whether the shares of European corporations represented in many country ETFs and regional ETFs can withstand the heat. Granted, many of the companies had been beaten down in 2010. Yet collectively, the forward P/E projections may be too rosy when one takes into account the deceleration of emerging-market growth.

Personally, I still like iShares Germany (EWG) and iShares Sweden (EWD). Both have been able to avoid getting burned in the euro-kitchen.

With that said, I do utilize the Vanguard Europe Fund (VGK) as a proxy for the region. A 10% pullback to $47.0 should trigger a stop-limit sell order for active managers of risk. A more troublesome signal for Europe would occur if VGK fell below its 200-day moving average, currently at $45.35.

Disclosure Statement: ETF Expert is a website that makes the world of ETFs easier to understand. Gary Gordon, Pacific Park Financial and/or its clients may hold positions in ETFs, mutual funds and investment assets mentioned. The commentary does not constitute individualized investment advice. The opinions offered are not personalized recommendations to buy, sell or hold securities. At times, issuers of exchange-traded products compensate Pacific Park Financial or its subsidiaries for advertising at the ETF Expert website. ETF Expert content is created independently of any advertising relationships. You may review additional ETF Expert at the site.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.68 +9.45 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs