Data from the eurozone this week suggests that the region's political problems haven't slowed the pace of economic recovery spurred on by ECB bond buying.
With the European Central Bank promising to continue with its large-scale bond buying program until inflation stabilizes, U.S. investors are beginning to look across the pond for cheap investment opportunities.
Data Says Recovery Has Taken Hold
Purchasing managers' surveys from March showed that the eurozone economy was picking up steam as new orders surged. Markit's composite PMI for the region as a whole rose to 54.1 in March from 53.3 in February. The March figure marks the eurozone's highest reading in almost four years.
A separate report from the European Commission showed that consumer confidence rose sharply in March, an encouraging sign. The figure increased to -3.7 from -6.7 in February and far surpassed analysts' expectations of a -5.8 reading.
Dollars Jump The Pond
While economic data is improving in the eurozone, most expect deflation to remain a threat in the near term; which in turn will encourage the ECB to continue with its stimulus program.
Investors are beginning to regain confidence in the region's businesses and Americans have begun to search for investment opportunities while prices are still low. Research firm EPFR Global said that American funds sent $3.9 billion into European stocks just last week, and that the trend is expected to continue.
Germany Leads The Pack
German markets seem to be the favorite among investors betting on a eurozone recovery as the nation's economy has remained in tact despite the bloc's financial crisis. Germany is also home to a plethora of export businesses, all of which stand to gain from the euro's recent decline.
Where To Buy
There are many options for investors interested in European exposure, but exporters are likely to see the largest initial gains due to the weak euro. German automakers like Daimler AG DDAIF and Volkswagen AG (ADR) VLKAY are popular picks as they hail from the bloc's strongest economy.
French Internet company Alcatel Lucent SA (ADR) ALU has been another popular choice for investors as it is a well known name across the globe in the cloud computing space.
If stock picking seems to risky, many investment firms are offering currency hedged ETFs. That way investors are covering a variety of European stocks without currency risks.
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