Thursday’s ETF To Watch: MSCI United Kingdom Index Fund (EWU)
Jared Cummans: As we approach the halfway mark to the second quarter, investors have lost most of the confidence that defined Q1. With major equity benchmarks soaring and positive data piling in from all around the world, the U.S. economy seemed to finally have some solid ground to stand on. But recent weeks have seen a resurgence of the nagging euro crisis as a number of countries continue to deal with enormous debt piles. But the euro countries are not the only ones to have fallen on hard times, as their neighbors to the north are having problems of their own [see also The Ten Commandments of Commodity Investing].
The United Kingdom’s economy has been struggling along with the rest of the euro zone despite utilizing the pound for its currency. “A four-year austerity program of 81 billion pounds ($130 billion) in government spending cuts has angered the public, and seen economic growth stall. Last month, Britain slumped back into recession for the first time since 2009″ writes David Stringer. Now, citizens and investors will look to important economic data and guidance from their government for signals as to where their floundering economy is headed, and today will feature several important data points [see also MLPA: The Low-Cost Leader In MLP ETFs].
The U.K. will release both their official bank rate as well as their asset purchasing figures. The bank rate is expected to hold at 0.50%, a number that has remained unchanged since March of 2009. The odds of the rate moving after an official recession has been announced seem highly improbable, but if rates were to jump in either direction, it would certainly be big news. Asset purchases are expected to also hold steady at their level of 325 billion pounds, where they have been for most of the year. More important than the results of these numbers will be the guidance offered by government officials; sometimes what is said about a report can have far more weight than the report itself.
In light of this big day for the U.K. economy, today’s ETF to watch will be the MSCI United Kingdom Index Fund (NYSEARCA:EWU). This fund measures the performance of the British equity market and is home to nearly $1.5 billion in total assets. The fund has had a relatively flat performance for the year, though it has featured a nice dividend yield topping 3%. While it will be hard to predict EWU’s movements for the day, it will certainly be a fund to keep a close eye on as the U.K. comments on its recession and how it plans to turn things around [see also Five ETFs George Washington Probably Would Have Liked].
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