Global Manufacturing Momentum Melts: ETFs To Watch

Though this signifies growth as any reading at or above 50 suggests expansion in activity, such feeble growth and a deceleration definitely stoke concerns. Soft demand in the wake of global growth worries can be held responsible for the overall global manufacturing slowdown. Though the U.S. economy was better placed in the developed economies’ pack, the situation in the other big economies is somewhat unsteady.

U.S.

As per Markit, the U.S. manufacturing PMI declined to 50.7 in May from 50.8 in April. Markit also noted that U.S. industrial output declined in May at the quickest pace in over six-and a-half years.

With the greenback gaining strength lately, the scenario could be dull in the coming months. Sizable capex cuts by energy companies to fight back the plunge in oil prices have probably hurt the U.S. manufacturing sector.
However, as per the Institute for Supply Management (ISM), the reading was 51.3 in May, up from 50.8 recorded in April.

China

Coming to the second largest economy of the world, the situation is more stressful. After posting sluggish factory output data since July 2015, the economy posted growth in March, going by official data.

But the Caixin China manufacturing PMI was 50.1 . The figure was the lowest since February, as per CNBC.

Euro Zone

The final Markit Eurozone Manufacturing PMI came in at 51.5 in May 2016, slightly lower than 51.7 in April. The latest figure is the lowest in three months. New business growth cooled down to a 15-month low while the employment picture was also sluggish.

Japan

The Markit/Nikkei Final Japan Manufacturing PMI was IMF Cuts GDP Outlook for Japan; ETFs in Trouble? ).

Needless to say, such drab data in the world’s key regions give us reasons to look at the below-mentioned international industrial ETFs. These ETFs might be under pressure in the days to come ( )

The $181.3-million ETF is heavy on the U.S. which takes about 54% of the basket. Japan, France and U.K. take the next three positions with a single-digit weight.

SPDR S&P International Industrial Sector ETF ( )

The fund looks to track the S&P Developed Ex-U.S. BMI Industrial Sector Index. The $16-million ETF is heavy on Japan with about 33.1% weight. U.K., France and Germany take the next three spots with about 9.8%, 9.7% and 7.2% weight, respectively. Siemens AG (DE:SIEGn) (3.66%), ABB Ltd. (2.05%) and Canadian National Railway Company (2.03%) are the top three stocks of the fund.

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Zacks Investment Research

Written By: Zacks Investment Research