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Adding Intrigue To Europe ETF Trade

March 13, 2018 11:08 am
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There is plenty of intrigue regarding the global economy in 2018. One of the more compelling destinations could prove to be Europe. While there are dozens of exchange traded funds (ETFs) dedicated to Europe, both diversified and single-country funds, aggressive, short-term traders may want to consider the Direxion Daily FTSE Europe Bull 3X Shares (NYSE:EURL).

EURL attempts to deliver triple the daily returns of the FTSE Developed Europe All Cap Index. That benchmark is a market capitalization weighted index that is designed to measure the equity market performance of large-, mid- and small-cap companies in developed markets in Europe,” according to Direxion.

That index is up over 16 percent over the past 12 months, and some data points indicate European stocks could deliver more upside as 2018 moves along, potentially making EURL a compelling play for risk-tolerant traders.

Acknowledge The Optimism

“The European Union is experiencing an unfamiliar optimism as 2018 takes shape and the Euro begins to show signs of an upswing against a falling dollar, pound and renminbi,” said Direxion in a recent note. “A large part of the enthusiasm in Europe comes from the fact that the European Union’s 19 member nations posted a combined GDP growth of 2.5 percent over 2017. Suddenly, for the first time in a long time, everything’s coming up Eurozone.”

EURL's underlying index features exposure to nearly 30 countries, but the U.K., France, Germany and Switzerland and combine for approximately 53 percent of the index's weight. Of the benchmark's 10 largest country weights, six are Eurozone economies.

“Mismatched ruling parties and austerity measures aside, the biggest asset the European Union has recently had over its global contemporaries is simply exhibiting a measure of stability,” said Direxion. “Brexit is the most obvious example of the European mainland’s relative constancy.”

Sector Exposure

EURL's index devotes almost 13 percent of its weight to European bank stocks, a factor to watch this year.

“For European bank investors, the rise in Europe and diminishing presence of Britain in the financial sphere might actually prove fortuitous,” said Direxion. “British banks that remain headquartered on the isle like HSBC Holdings aren’t likely to lose continental business because of the split. Meanwhile, banks like BNP Paribas and ING Group may stand to do extremely well in a growing EU.”

Industrial and healthcare stocks combine for 24 percent of the benchmark's weight.

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