Europe ETFs: Who’s Hot, Who’s Not

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Europe exchange traded funds (ETFs) are a mixed bag these days. On the one hand is a booming Germany; on the other are a host of nearby nations still treading water, at best.

In Germany, borrowing costs are a record lows and exports – aided by a weak euro – have soared. Elsewhere in Europe, the story is a much different one.

• Borrowing costs have hit fresh records in Ireland; in Portugal and Spain, they’re close to all-time highs, writes David Oakley for The Financial Times. High borrowing costs would raise lending costs for companies and put more more pressure on public finances. [Europe ETFs for the Eurozone’s Growth.]
• Ireland, Spain and Portugal are showing weak growth and may even fall to deflationary pressure. Greece is still feeling pain, too; its manufacturing sector shrank at a faster pace last month.
• Broader eurozone unemployment remained at 10% in July, despite the eurozone economy expanding by 1%, reports Paul Hannon for The Wall Street Journal. The joblessness rate in Italy is at 8.4%, Germany at 6.9%, France at 10%, Ireland at 13.6% and Spain at 20.3%. [Spain ETF Struggles with Unemployment and Slow Growth.]
• The eurozone’s annual inflation rate dropped in August to 1.6%, indicating that the European Central Bank may continue to maintain its loose monetary policy. Analysts project that the inflation rate will rise to around 2% by the end of the year as food and energy inflation move higher.

How can ETF  investors play this? For the weaker countries like Spain, Ireland and Italy, take a look at the trend lines: they’re all well below the 200-day moving average. You can sign up for alerts in order to be notified when iShares MSCI Spain (NYSEArca: EWP), iShares MSCI Ireland (NYSEArca: EIRL) or iShares MSCI Italy (NYSEArca: EWI) cross their long-term trend lines.

Funds that directly relate to the stronger areas of the European economy – such as iShares MSCI Germany Index Fund (NYSEArca: EWG) or iShares MSCI Switzerland (NYSEArca: EWL) – may be better bets, as long as they’re above their trend lines. EWG is below for now.

Your last option is to look at broad Europe ETFs, such as iShares S&P Europe 350 Index Fund (NYSEArca: IEV) or SPDR Dow Jones Euro STOXX 50 (NYSEArca: FEZ), which can help spread out your exposure and reduce risk.

For more information on Europe, visit our Europe category.

Max Chen contributed to this article.