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concrete plans of action, adding to investors already high anxiety as numerous European and US banks saw their credit ratings cut. Comments from the sidelines of the IMF/World Bank meetings over the weekend suggest that European authorities increasingly accept the likely inevitability of Greek sovereign default and are now looking to limit contagion by ring fencing bank exposure as much as possible. But again, no concrete plans of action were announced. Eurozone confidence and unemployment data will likely set the tone this week, with markets anxious that a weakening in core Europe growth engines will complicate efforts to mend European government fiscal accounts.
Investors opt for diversified commodities and tactical short exposure to play volatile markets. ETFS Short All Commodities (SALL) saw $8mn of inflows, the highest in over two and a half years, as some investors look to capitalize on current market weakness. SALL jumped 7% over the week. ETFS All Commodities (AIGC) and ETFS Forward All Commodities (COMF) saw combined inflows of $12mn last week, the second highest sector inflows behind energy. Broad-basket exposures provide investors with a high degree of diversification across commodity markets as some individual commodities experience elevated volatility at present.
Gold sees profit taking as investors demand liquidity. Gold ETCs saw $52mn of outflows last week as investors reduced non-cash positions as risk aversion mounted. Gold prices were also hit by a sharply appreciating USD last week and the announcement of a further 21% increase in gold futures margin requirements by the CME on Friday. The moves mirror those seen in September 2008 when gold acted as an important source of liquidity in the earliest stages of the post-Lehman credit crisis. Prices subsequently bounced back rapidly vs. other assets in late 2008 with gold positions being quickly rebuilt as investors built diversified positions in perceived store of value assets.
Lower prices tempt bargain hunting investors in leveraged energy ETCs. ETFS Leveraged Natural Gas (LNGA) and ETFS Leveraged Crude Oil (LOIL) saw their highest inflows in over 4 weeks as the sharp drop in risk asset prices last week tempted some investors back into positions on expectations that prices may have overshot too far to the downside. Both ETFS Crude Oil (CRUD) and ETFS Natural Gas (NGAS) have dropped over 20%
Source: ETFWorld – ETF Securities
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