The Brazilian market proved that the country can get over an embarrassing loss. In fact now that everyone can focus on work again and there is no chance of a month long victory celebration the iShares MSCI Brazil Capped ETF (EWZ – 48.80) gained about 1% last week. However, despite a strong performance in EWZ implied volatility dropped slightly on the week.
Despite the Brazilian market being somewhat resilient, the iShares MSCI Emerging Markets (EEM – 43.89) ETF was down about a half a percent last week. That slight weakness in EEM resulted in almost a 5% gain in VXEEM which rose from 13.71 to 14.37.
Looking at the curves, both front month futures were down despite a rise in VXEEM and a small drop in VXEWZ. There are just two more trading days left until settlement so the chance of a volatility event that will push the respective indexes higher before expiration has diminished greatly and the drop in July futures was the result.