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.


Exports have stalled, but Europe remains in good shape
(Image credit: 2018 Getty Images)

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.

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.

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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.

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.

Marina has a PhD in globalisation and the media from the London School of Economics, where she worked as a teaching assistant on the MSc Global Media. In 2014 she was invited to be a visiting scholar at Columbia University's sociology department in New York.

She has written for the Economists’ Intelligent Life magazine, the Financial Times, the Times Literary Supplement, and Standpoint magazine in the UK; the New York Observer in the US; and die Bild and Frankfurter Rundschau in Germany. She is trilingual and lives in London. She writes features and is the markets editor at MoneyWeek..