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U.S Investors Buying More European Stock Funds

Tuesday, 1 June 2021-

The global economy seems to have taken the heaviest blow over the uncertainties surrounding the Covid-19 pandemic. However, this may no longer be the case for U.S investors as more are seen purchasing European stocks. Despite the global economic situation being at neck-to-neck with domestic earnings, U.S investors are reaping high in the European stock market.

According to last Wednesday’s statistics, the top eight stock funds purchased by the U.S-based investors included the following three;

· JPMorgan BetaBuilders Europe ETF BBEU (0.17%).

· iShares MSCI Eurozone ETF EZU (0.16%).

· Vanguard FTSE Europe ETF VGK (0.26%).

Matthew Bartolini, the head of SPDR Americas research at State Street Global Advisors, also reports that European ETFs have so far seen an injection of about $4 billion in May. This remains to be the highest-earning month for the region since 2015. But the question is;

What Could Have Caused an Increase in ETF Investments?

According to Bartolini, Europe has a lot of things working in its favour right now that makes more investors attracted to it. For instance, Europe’s economic limitations and lockdowns are being removed in the first recovery phase. This has attracted more ETF investors who had earlier went into sector funds and other small-cap styles. Moreover, State Street’s numbers- a combination of price-to-earnings, price-to-sales, and price-to-book- also show that European stock valuations are still on the lower 1% compared to the S&P 500 and over the last 15 years.

The region is also boosted by the still-unallocated European recovery fund and the opening global travels. Before the Covid-19 crisis, the European activity was at 85%, say the analysts at Jefferies. Though this may not be the same level in the post-Covid-19 economy, there is a positive change in the euro area economy. For example, the latest Institute of Economic Research (Ifo) and National Institute of Statistics and Economic Studies (INSEE) surveys show that there is improved business confidence in Germany and France, led by the service sector.

The three companies triggering the economic recovery are;

· Payments company Adyen (ADYEN, -1.08%).

· Payments-focused bank Nexi (NEXI, +0.18%).

· Automobile maker Stellantis (STLA, 3.96%).

What About the Border Markets?

The stock market improvement has not been limited to the European market alone. This is because, on both sides of the Atlantic, the Stoxx Europe 600 and S%P 500 have risen to 12% and 0.13% respectively in 2021. The border market, therefore, experienced an increase on Thursday, with Stoxx Europe 600 SXXP increasing by 0.27% to 0.5% as the U.S stock market opened higher.

Other Forecasts

It is evident that the economic bounce back is not only in the stock market. The international travels are also expected to increase their productions as indicated in the following analysis;

· The Airbus AIR, share jumped from 9.22% to 10% as the planemaker plans to scale up the production. The Boeing BA, 3.67% rival is planning to increase the production from 45 A320 narrow-body aircraft a month in Q4 to 64 by the Q2 of 2023. There are possibilities to produce 75 aircraft by 2025. Airbus is also planning to increase the manufacture of two other models, the smallest A220 and the long-range jet A350.

· Bayer, BAYN, experienced a 5.04% decrease in share after a U.S judge rejected its plans to set aside $2 billion for people suffering from cancer after using Roundup weedkiller. As a result, Bayer is planning to ultimately remove the product from the U.S for retail use.

· Tate and Lyle, TATE, shares dropped by 4% after predicting adjusted earnings per share to fall because of lower profitability in its products and higher tax rate. The decreased earning is also caused by the presence of its artificial-sweetener making primary products on the market.


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