Exchange traded funds that track European assets strengthened over August as central bank actions helped bolster confidence in Eurozone markets.
The Vanguard MSCI Europe Index (NYSEArca: VGK) gained 2.6%, iShares S&P Europe 350 (NYSEArca: IEV) added 2.7% and SPDR Dow Jones EURO STOXX 50 ETF (NYSEArca: FEZ) rose 5.2% over the past month.
“Two things stand out when you look at August. The Fed minutes signaling that they’d take a more active stance and the ECB talking about bond purchases,” James Ashley, senior European economist at RBC Capital Markets, said in a Wall Street Journal article. [European ETFs Recover on Central Bank Hopes]
“Markets moved quite dramatically after the ECB announcement [on Aug. 2]and Spanish and Italian yields have fallen substantially. We will probably see these events repeated next month, with the ECB fleshing out how it will be buying bonds and with speculation that the Fed will extend stimulus measures,” Ashley added.
Currently, the equities markets are waiting on the Fed, but “if you were reading between the lines of Bernanke’s speech, there were heavy hints that the Fed will do [a third round of quantitative easing],” Ashley said.
Along with European stocks, the euro currency has also appreciated against the U.S. dollar. The CurrencyShares Euro Trust (NYSEArca: FXE) gained 2.0% over the past month.