European banks was of the most maligned sectors in the world in 2017, at least in the headlines. June's Brexit, not to mention
Deutsche Bank AG (NYSE: DB)'s September
near-collapse, certainly didn't do a lot to help with sentiment.
But the tide looks like it's started to turn. The MSCI Europe Financials Index, whose top holdings include HSBC Holdings
plc (ADR) (NYSE: HSBC), Banco Santander,
S.A. (ADR) (NYSE: SAN), and Allianz SE
(ADR) (OTC: AZSEY), is up more than 12
percent this year.
Ongoing good fortune for European banks should increase the allure of the Direxion Daily MSCI European Financials Bull
2X Shares (NYSE: EUFL), which debuted 10 months ago as thefirst US-listed leveraged play
on European banks. EUFL attempts to deliver double the daily returns of the aforementioned MSCI Europe Financials Index.
The index is "a free float-adjusted, market capitalization-weighted index and represents securities of large-capitalization and
mid-capitalization companies across developed market countries in Europe,"according to Direxion, one of
the largest issuers of inverse and leveraged ETFs.
With the final round of France's presidential election slated for May 7th and an upcoming election in the U.K.,
interest is increasing in EUFL. The ETF's volume for the five days ended April 28th, was more than 153 percent above the
trailing 20-day average, according to Direxion data.
Only one Direxion leveraged ETF saw a larger increase in turnover during those five days.
Top holdings in the index include Lloyds Banking Group PLC (ADR)(NYSE: LYG) (24.39 percent), Bank of Ireland (ADR) (OTC: IREBY) (10.48 percent), HSBC (7.52 percent) and Barclays
PLC (ADR)(NYSE: BCS) (6.43 percent). Overall, over
half the index is allocated to Britain, with Spain and Ireland having the second and third highest exposures.
Interestingly, the strength shown by the banks in this index is not spreading to the entire industry. When it comes to some of
the more popular names, fundamental concerns remain.
“Barclays Plc, Deutsche
Bank AG and UBS Group AG (NYSE: UBS) are all expected to post smaller increases in fixed-income trading revenue than
the collective 24 percent jump reported by their five largest American counterparts, analysts estimate," according to
Bloomberg. "While the U.S. firms eked out a gain in equities trading from a year earlier, Europe’s banks are estimated to
report an overall decline."
Traders willing to wager that the rebound for European banks is running on fumes can turn to the Direxion Daily MSCI European
Financials Bear 1X Shares (NYSE: EUFS). EUFS is not
leveraged, but it does deliver the
daily inverse performance of the MSCI Europe Financials Index.
© 2017 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.