Australia ETF Supported by Rate Cut, Data
November 14th, 2011 at 4:08pm by Tom Lydon
A lower unemployment rate and higher consumer sentiment are supporting growth in the Aussie economy. The Reserve Bank of Australia earlier this month cut its main cash rate 25 basis points to 4.5%, setting the stage for more growth.
Will this positive economic sentiment give life back to the exchange traded fund iShares MSCI Australia Index (NYSEArca: EWA)? The ETF holds nearly $3 billion in assets. [Australia ETF in Snapback Rally on Risk-On Trade]
The Australian jobless rate stood at 5.2% in October, which helped the country keep its status of being one of the best performing labor markets in the developed world. Enda Curran for WSJ.com reports this means the central bank is not under pressure for further monetary easing. [Aussie ETF Rebounds From Down Under]
“There is limited further downside to employment growth unless European developments drive employers to become more bearish,” according to a Citi economists note.
The fact that the country was able to add jobs during the strong Eurozone crisis gives merit to the strength of the economy. However, given the negative economic conditions in the Eurozone, it is highly unlikely that the labor market can make further gains. [The Contrarian: Single-Country ETFs]
“We are going to see the Eurozone slowing down world economic growth right across the board,” Graham Kraehe, a board member of the Reserve Bank of Australia, said. “That’s part of the reason our forecasts for growth in this country are coming down a bit, but we’re not in a crisis scenario at all.”
iShares MSCI Australia
Tisha Guerrero contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.