Investors are facing heightened volatility in European and South Korean exchange-traded funds (ETFs), according to Barclays (LON:BARC) strategists led by Stefano Pascale.
The political situations in France and South Korea have led to implied volatility levels that are considered expensive. This assessment comes as the iShares MSCI South Korea ETF (NYSEARCA:EWY) experiences a significant rise in the put/call open interest ratio following an unexpected declaration of Martial Law in South Korea.
In contrast, the implied volatility on the Communication Services Select Sector SPDR Fund (NYSEARCA:XLC) is currently deemed the cheapest among a universe of 60 ETFs.
Additionally, the downside skew on XLC is observed to be the steepest when compared to both the collective ETF universe and historical levels. Barclays strategists point out that January 2025 put spreads on XLC are worth highlighting as valuations are on the higher side.
Meanwhile, the VStoxx index, which measures the anticipated volatility for the Euro Stoxx 50, has been on a downward trend over the last three sessions.
This index is often used as a barometer for investor sentiment and uncertainty in the European markets. The recent fall suggests a temporary easing of volatility expectations among European stocks.
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