Investors should hunt for bargains in European markets

Despite all the gloom, European markets are in better shape than they've been for ages, and the stockmarkets look appealing.


With Brexit only days away, this may seem "a strange time to be thinking of putting some of your... money into European stockmarkets," says Mark Atherton in The Saturday Times. However, the gloom surrounding Britain's departure and the European economy may have created an opportunity for "sharp-eyed investors to buy valuable European stocks cheaply".

European markets are geared to global growth

"Given that exports make up approximately half of GDP in the eurozone, a slowdown in global growth was always going to have an effect," Tilmann Galler, a fund manager at JP Morgan, told The Times.

Subscribe to MoneyWeek

Become a smarter, better informed investor with MoneyWeek.

At the end of 2018, Germany only narrowly avoided a recession, and Italy succumbed to its third contraction in a decade. The composite purchasing managers' index (tracking both services and manufacturing activity) hit a four-year low early this year.

Still, the region is hardly a write-off. Unemployment has continued to fall in Europe it is now at an 11-year low of 7.8% while wages have picked up: last December they reached a ten-year high. Falling oil prices have also boosted households' purchasing power.

Advertisement - Article continues below

The composite purchasing managers' index (PMI) ticked up in February, while the service sector is "showing greater resilience", Chris Williamson, chief business economist at IHS Markit,told Reuters.

"The European economy remains in better shape than it has been [in] for much ofthe past decade," Chris Hiorns of the EdenTree Amity European fund told The Times. And there may be better news ahead. European marketshave climbed to a five-month high after the global rallywas "given a shot in the arm by hopes that the US andChina are closing in on atrade deal", says Tom Reesin The Daily Telegraph.This would give global confidence a big boost.

In the meantime, the Euro Stoxx 50 index of the eurozone's 50 biggest companies looks appealing on 13.2 times this year's earnings, only slightly above theFTSE 100's 12.6, while ityields 3.6%.

All this makes the Fidelity European Values investment trust (LSE: FEV) worth a look; it is on a discount to net asset value (NAV) of 9%.Also worthy of further research is the Jupiter European Opportunities Trust (LSE: JEO), currently on a 5% discount to its NAV.




Investment trusts: the Cinderella of investment arrives at the ball

Investors should look beyond the market noise of a single year and examine the bigger picture. Max King explains what we can learn from 25 years of in…
8 Jan 2020
Share tips

Share tips: eight stocks that should deliver robust returns

Ryan Ermey of US publication Kiplinger’s Personal Finance chooses his favourite stocks for the next decade, which should be able to grow for years.
28 Dec 2019
Share tips

Share tips of the week

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
20 Dec 2019
Share tips

Share tips of the week

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
13 Dec 2019

Most Popular


Currency Corner: how high can the pound go against the euro in 2020?

In the month in which we should finally leave the European Union, Dominic Frisby takes a look at the pound vs the euro and asks just how high sterling…
13 Jan 2020

Where will markets be in 2030? Here are 20 forecasts for the 2020s

A lot has changed in the last ten years – stockmarkets soared, technology transformed our lives and politics has changed beyond measure. Here, Dominic…
14 Jan 2020
Personal finance

How much the state pension will rise by this year

While Boris Johnson promised to hold a full budget within 100 days of his election victory, many of the details of next year’s state pension increases…
10 Jan 2020

Money Minute Wednesday 15 January: UK inflation and house prices

In today’s Money Minute, we look ahead to the latest UK inflation and house price figures, plus we have Germany’s GDP data for 2019.
15 Jan 2020