Surprise ETF Winners & Losers Post ECB Easing

As expected, the European Central Bank (ECB) president Mario Draghi turned super dovish in the March meeting held on March 10. In fact, the announcements were way more accommodative than what the market expected.
 
The bank has lowered the deposit facility rate to negative 0.4%, down from the previous rate of negative 0.3%. It also cut its main refinancing rate and marginal lending rates by 0.5% each to zero percent and 0.25%, respectively. If this was not enough, the ECB’s monthly bond purchase size has risen to EUR 80 billion from 60 billion previously.

Normally, such a move puts pressure on the currency of the region which is rolling out such an intensified monetary policy. But in case of the Eurozone, the strategy apparently backfired. We’ll tell you why by describing the surprise ETF winners and losers post ECB meeting.
 
Surprise Winners 
 
CurrencyShares Euro ETF (FXE)
 
The euro ETF gained over 1.6% on March 10 and added about 0.01% after hours. This is because of the fact that some measure of policy easing was already anticipated by the market and securities had priced in such a move. So, after the announcement, an exaggerated reaction was missing in the market.
 
A more-than-expected easing could still have left a somewhat desired (by the ECB) impact on asset classes but Mario Draghi’s comment that he doesn’t feel  the need to cut rates further spoiled the market mood. As a result, instead of diving, the euro started gaining strength. The currency recorded its largest single-day gain against the greenback since December (read: Top and Flop Currency ETFs YTD).
 
If this was not enough, investors’ have lost their risk appetite this year and euro has acted as a safe-haven currency. As a result, FXE – which looks to reflect the price of euro in USD – has returned over 2.7% in the year-to-date frame (As of March 10, 2016).
 
Global X MSCI Greece ETF (GREK)
 
Greece ETF scooped up the best gain of about 2.6% in the European space as the broad-based rebound in emerging markets helped the fund to rally. GREK was up 27.5% in the last one month (read: Can Emerging Market ETFs Sustain the Rally?).
 

Surprise Losers

Germany Hedged Equity Fund (DXGE)
 
As mentioned earlier, stocks saw muted gains. Along with the ECB’s expected move, a drop in oil prices also played foul with the global equities on March 10. A dour mood was prevalent in the currency-hedged ETF world. Vanguard FTSE Europe ETF (VGK) nudged up just 0.1% on March 10 while WisdomTree Europe Hedged Equity ETF (HEDJ) lost more than 1.3% on the day (see all European equities ETFs here).

Particularly, most German ETFs were battered post ECB meeting barring a few like SPDR MSCI Germany Quality Mix ETF (QDEU - ETF report), which added about 1.8%. As Euro surged, the export sector in the Eurozone came under pressure. This cast a cloud over the German stock index as exports of goods and services in Germany accounts for about 45% of total GDP. Especially, Germany’s key automotive sector, one of the main drivers of export, was clobbered last week.

Many Germany ETFs were down on March 10 with DXGE leading the losses. DXGE was down 1.95% on March 10 (read: 11 Most Popular Currency Hedged ETFs).