European stocks and related exchange traded funds could continue to fall behind other developed markets as the Eurozone economy begins to stagnate and struggles against high unemployment rates and weak consumer prices.
The Vanguard FTSE Europe ETF (NYSEArca: VGK) has dipped 0.7% year-to-date. In comparison, the S&P 500 index is up 6.7% so far this year.
The Eurozone’s gross domestic product was flat in the second quarter, compared to the first, and eked out a 0.2% growth in annualized terms, down from the first quarter’s 0.8% rise, the Wall Street Journal reports.
Other developed economies, like the U.S. and the U.K., have experienced healthier expansions since the global financial crisis, but the Eurozone remains 2.4% below its pre-crisis peak.
The euro zone “will probably remain stuck in stop-and-go mode,” said Peter Vanden Houte, an economist at ING, said in a note.
Germany, which provides about 30% of the Eurozone’s output, contracted 0.2% over the second quarter, its first contraction since the end of 2012, the Financial Times reports. The escalating tensions with Russia have weighed on confidence, pressured investments and hindered trade. The iShares MSCI Germany ETF (NYSEArca: EWG) has declined 8.1% year-to0date. [Germany, France ETFs Fall Into A Market Correction]
Additionally, France experienced zero growth and Italy fell back into a recession, its third since 2008. Year-to-date, the iShares MSCI France ETF (NYSEArca: EWQ) is down 3.6% and iShares MSCI Italy Capped ETF (NYSEArca: EWI) is up 0.7%.