Stocks and exchange traded funds tied to the Australian market advanced in Tuesday's premarket trading in the U.S. The move came after the Reserve Bank of Australia raised interest rates by a lower-than-expected amount.
The country's central bank increased its key rate by 25 basis points rather than the 50 basis points that was anticipated. As a result, Australian stocks rallied, with the S&P/ASX 200 finishing higher by 3.75%. The market was also helped by momentum from Wall Street's rally the previous day.
With the rise in Australian shares, U.S.-listed funds and stocks tied to Australian securities felt a topside push in premarket action. The iShares MSCI-Australia ETF (NYSEARCA:EWA), a fund that tracks an index composed of Australian equities, is +1.7% in premarket trading.
Another fund to keep an eye on is the Franklin FTSE Australia ETF (FLAU), however premarket pricing is not listed.
Aside from ETFs, Australian stocks that are listed on U.S. exchanges are also in the green early on. Some names include Immuron Limited (IMRN) +9.8%, Genetic Technologies Limited (NASDAQ:GENE) +2.5%, BHP Group Limited (NYSE:BHP) +1.3%, Immutep Limited (IMMP) +7.8%, and Kazia Therapeutics Limited (KZIA) +2.6%.
Year-to-date price action: EWA -18.8%, FLAU -18.9%, IMRN -23.7%, GENE -39.9%, BTH -14.4%, IMMP -53.5%, and KZIA -86.3%.
Aside from the rise in Australian equities, Australian Treasury yields and the Aussie dollar (NYSEARCA:FXA) dropped. The Aussie dollar slid against a basket of currencies that included the dollar, euro, pound, and yen. At the same time, the Australian 2Y dropped 35 basis points since Monday’s close to 3.12%.
The RBA has now moved rates higher in its last six meetings to 2.6%, but its latest hike may signal to investors that peak rates may be nearby.