After feeling the effects of the financial crisis, the European economy is out of a negative growth pattern, boasting 0.4% growth in the third quarter. Matthew Saltmarsh for The New York Times reports that other factors that signal a turnaround include a stronger currency and growth in countries such as Germany and France. (Why it takes more than a stronger currency for growth to resume).

Recovery in the region as a whole is mixed, though. Unemployment remains startlingly high in some areas, wages have stagnated and lending still needs a push to operate at full strength, Terence Roth and Christopher Emsden for The Wall Street Journal report. Greece, Finland and Spain are still contracting.

Although these economies continue to struggle along, industrial countries centered in the region’s economic core are setting the pace for an overall recovery. (Sweden has been a recovery leader). To play the recovery with ETFs, look for those areas that are sitting above their long-term trend lines (the 200-day moving average). Europe can be accessed via either broad, regional ETFs or some strong single-country funds.

For more stories about Europe, visit our Europe category.

• iShares MSCI Germany Index (NYSEArca:EWG): up 19.2% year-to-date

• iShares MSCI EMU Index (NYSEArca:EZU): up 28% year-to-date

• SPDR Dow Jones Euro STOXX 50 (NYSEArca:FEZ): up 25.8% year-to-date

• iShares MSCI Sweden Index (NYSEArca:EWD): up 62.3% year-to-date, one of the best

• iShares MSCI Austria Index (NYSEArca: EWO): up 67.9% year-to-date

Consumer sentiment fell in the early part of this month to the weakest in three months. Concerns about jobs and income continue to weigh on consumers’ minds, Reuters reports. This could mean restrained spending around the holidays. (How to play retailer’s price wars).

The U.S. trade deficit widened in September by a larger-than-expected 18%, the highest level since January. Imports also jumped by the most in 16 years. The trade deficit’s growth reflected increasing demand for oil and cars amid the economic rebound, reports Bob Willis for Bloomberg.

Oil prices dipped to their lowest point in a month as investors began to pay more close attention to the slump in demand for energy. Although for much of the year many thought demand would resume, consumers and businesses are still using less gasoline than they were a year ago, says Chris Kahn for the Associated Press. United States Oil (NYSEArca: USO) is trading flat this morning.

Europe has officially left its recession. The eurozone economy was largely propelled back to health on the strength of export growth and improving industrial production in Germany, its largest economy. GDP for the 16 countries making up the region expanded by 0.4% in the second quarter, reports Matt Saltmarsh for The New York Times. iShares MSCI Germany (NYSEArca: EWG) is up 1.2% this morning. For more stories about Europe, visit our Europe category.

Sweden’s government upgraded its economic outlook to an expected contraction of 4.9% this year, followed by 2% growth next year and unemployment estimates for 2010 were lowered to 10.7% from 11.4%, as stated in BusinessWeek. (Sweden’s improved economic forecast)

Current government stimulus measures have been a contributing factor for the more optimistic outlook, but the measures are calculated to incur a $4.7 billion budget deficit in 2010, increasing 3.8%, from 2.2% this year. Furthermore, the government will also reduce income taxes by $1.45 billion.

According to the National Institute of Economic Research, household pessimism about the Swedish economy is moderating, inching up to 7.5 in October from 5.6 in the previous month, and business confidence rose to -1 in October from -13 in July, according to RTTNews. Manufacturing confidence also increased to -12 from -20. All economic indicators were above economists’ expectations.

Sweden’s Riksbank left key rates unchanged at 0.25% and the Central Bank stated that the repo rate will remain low until fall 2010, report Paul Hannon and Robb M. Stewart for The Wall Street Journal. Any inflationary worries are negligible since annual inflation forecasts are well below target.

For more information on Sweden, visit our Sweden category.

• iShares MSCI Sweden Index (NYSEArca: EWD): up 59.8% year-to-date

Max Chen contributed to this article.

Vanguard

Vanguard Group Inc. is already the largest U.S. stock and bond mutual fund manager, and now the firm has set out to conquer the ETF industry, one sector at a time. Charles Stein for Bloomberg reports that Vanguard is the third-largest sponsor of ETFs, and has captured more than 30% of the money flowing into the business this year by charging an average fee of 0.15%; the industry average is 0.54%.

Vanguard now has $77 billion in ETFs, after inflows of $17.8 billion this year. The firm’s share of the market rose to 11%, up from 8.5% at the end of last year. (How to choose ETFs).

Their strategy of charging the lowest in fees is garnering the interest of many investors who are educated on the possibility that fees can cut into principal and earnings. (What else is important when selecting ETFs?).

But Vanguard has something else interesting at play: the firm’s founder, John Bogle, has been vocal in his criticism of ETFs. His chief complaint is that they encourage short-term trading. Bogle stepped down as Vanguard’s CEO in 1996.

For more stories about ETFs, visit our ETF 101 category. Among Vanguard’s lineup of funds include:

• Vanguard Emerging Markets ETF (NYSEArca: VWO): up 68.6% year-to-date
  

• Vanguard Europe Pacific ETF (NYSEArca: VEA): up 25.3% year-to-date

• Vanguard REIT Index ETF (NYSEArca: VNQ): up 15.4% year-to-date

The 10.2% unemployment figure is far worse than what economists had expected, and they don’t see any sign of relief until next year. While the pace of layoffs has slowed, the unemployment rate is continuing to climb, reports Javier C. Hernandez for The New York Times.

Unemployment isn’t just as issue here, either; millions around the world don’t expect to see relief in the form of jobs anytime soon. The European Union forecast unemployment in the eurozone to rise to 10.7% in 2010, up from 9.5% this year. Unemployment ranges from 3.5% in the Netherlands to 18.3% in Spain, reports Greg Keller for the Associated Press. In China, the official urban unemployment rate is 4.3% in the third quarter. Brazil’s unemployment was 8.1% in August, almost unchanged from the previous month.

Gold futures have soared to a record $1,100 an ounce today. While some profit-taking briefly sent gold lower, it resumed its course and analysts expect it to continue to move higher, reports Allen Sykora for The Wall Street Journal. SPDR Gold Shares (NYSEArca: GLD) is up about 0.4% year-to-date. (More on gold can be found here).

Businesses slashed inventories for a record 13th straight month in September, although sales rose for the sixth consecutive time. Many hope that improving sales figures will encourage businesses to start lifting production, although a rising jobless rate heightens fears that consumers won’t start spending anytime soon, reports Martin Crutsinger for the Associated Press. (An ETF to play holiday shopping).

The world’s largest insurer, AIG (NYSE: AIG) reported that it was profitable for the second consecutive quarter. Although things have stabilized, the company’s CEO said that earnings will remain choppy while they restructure.  SPDR KBW Insurance (NYSEArca: KIE) is up about 0.6% this morning.

G20 Finance Ministers are meeting this week to discuss financial reform and economic recovery. While these economies have put in place certain policies in order to push along a recovery, they’re not policies anyone wants to keep in place forever. The general consensus is that it’s too soon to reverse the measures, but it’s not too soon to begin talking about when and how it would happen. Government debt in developed G20 countries is likely to reach 118% of annual national income in 2014, reports Andrew Walker for the BBC.

For more stories on the global economy, visit our global ETF page.

The Labor Department has reported that the number of newly laid-off workers last week dropped to 512,000, the lowest point since January. It’s also 4,000 fewer than what economists had forecast. The report has a downside, though: worker productivity in the third quarter rocketed by 9.5%. This means that employers are becoming more efficient and more productive, so companies will have little reason to hire more, report Martin Crutsinger and Christopher S. Rugaber for the Associated Press.

The European Central Bank kept interest rates at a record low today, as expected. Later, the bank’s president will hold a press conference that many expect will give hints as to when the ECB will begin to cut back on bank lending and whether it intends to charge them more for 12-month money, reports Jana Randow for Bloomberg. iShares MSCI EMU (NYSEArca: EZU) is up about 1.5% this morning. (How Europe can keep the ball rolling).

The outlook for retailers brightened somewhat in October. Chain-store sales notched their second consecutive gain, and it was the best performance for the industry in more than a year. The industry reported an overall 1.8% sales jump at stores open for at least a year, reports Stephanie Rosenbloom for The New York Times. Not entirely surprisingly, chains that sell designer brands at a discount were the strongest performers. SPDR S&P Retail (NYSEArca: XRT) is down about 0.7% this morning. (Brand names boost consumer staples).

Climate legislation received a boost today as Senate Democrats received approval of a cap-and-trade bill that aims to reduce U.S. greenhouse gases. Republicans object to the legislation because they feel that it’s being rushed, reports Simon Lomax for Bloomberg. The House bill seeks to reduce emissions by 17% below 2005 levels by 2020; the Senate bill is calling for a deeper cut of 20%. iShares S&P Global Clean Energy Index (Nasdaq: ICLN) is up nearly 2% this morning.

For full disclosure, Tom Lydon’s clients own shares of EZU.

Warren Buffett’s Berkshire Hathaway (NYSE: BRK-B) has agreed to buy Burlington Northern Santa Fe (NYSE: BNI) for $34 billion. Burlington Northern is the country’s second-largest raiload, and it’s also the biggest transporter of food products and coal, making it a harbinger of economic health, says Samantha Bomkamp for the Associated Press. iShares Dow Jones U.S. Transportation Average (NYSEArca: IYT) is up nearly 5% this morning on the news. Year-to-date, it’s up 3.3%.

Factory orders rose 0.9%, thanks to heavier demand in automobiles, heavy machinery and military aircraft. It’s the fifth increase in six months. The jump has economists optimistic of a recovery, but if consumer spending doesn’t pick up, manufacturing will suffer again. PowerShares Global Emerging Markets Infrastructure (NYSEArca: PXR) is down about 1.2% this morning; Caterpillar (NYSE: CAT) is 2.3%. (Yesterday’s report on industrial activity).

The European Union raised its 2010 growth forecast for the 27 nations to 0.7%, reports David Jolly for T he New York Times. By 2011, the EU anticipates growth of 1.5%. Despite the positive forecasts, the EU still feels that some factors will weigh on a recovery, including weak private demand and a struggling job market. (For more stories on Europe, visit our Europe category). iShares MSCI EMU (NYSEArca: EZU) is down nearly 2% this morning.

For full disclosure, Tom Lydon’s clients own shares of EZU.

NIER, a state-sponsored institute which produces economic forecasts for the government, says it will raise Sweden’s outlook. The forecast for 2009 has been raised by a few tenths of a percent, while they see GDP growth in 2010 coming in around 2%. Their previous forecast called for a 5% contraction in 2009 and growth of 1.5% in 2010, reports Reuters. (Read on as to why Sweden’s banking system is an example).

Lending support to an upgrade is that consumer confidence improved in October, along with business confidence. Conversely, pessimism about unemployment and personal finances has declined, reports RTT News. (Five reasons to watch Sweden).

For more stories about Sweden, visit our Sweden category.

• iShares MSCI Sweden Index (NYSEArca: EWD): up 50.9% year-to-date

A weak U.S. dollar helps U.S. manufacturers, U.S. exporters and U.S. multinationals, writes Gary Gordon for ETF Expert. But a weak dollar means foreign exporters and foreign manufacturers are hurting as they try to sell to the U.S. market. (What’s so great about a weak dollar?)

For example, the strong euro is bad for business in the Eurozone. In August, exports dropped 6% from the previous month because of an appreciating euro. (More on the eurozone).

• CurrencyShares Euro Trust (NYSEArca: FXE): up 5.1% year-to-date

Japan is another country watching its currency appreciate. The Japanese yen is likely to stay stable since the island nation is heavily export dependent.

• CurrencyShares Japanese Yen Trust (NYSEArca: FXY): up 0.2% year-to-date

Both FXE and FXY are in an uptrend, tracking above their 50-day and 200-day moving averages.

As it stands, Europe and Japan don’t have much room to further decrease the value of their currencies through monetary policies since interest rates are already so low. Still, the U.S. dollar can’t go on depreciating forever.

For more information on world currencies, visit our currency category.

Read the disclaimer, as Tom Lydon is a board member of Rydex Funds.

Max Chen contributed to this article.

The U.K. economy unexpectedly shrank by 0.4% in the third quarter this year, officially sending the region into its longest recession since record-keeping began more than 50 years ago.  (Why the United Kingdom is hurting).

Edmund Conway and Andrew Porter for Telegraph U.K. report that adding insult to injury is that the United Kingdom has fallen beneath Italy for the first time since the mid-1990s to become the world’s seventh-largest economy. (When will Italy rebound?)

Blame two things: the devaluation of the British pound and the severity of the recession overall. France surpassed the United Kingdom last year. (Tom talks Europe on CNBC).

Italy first surpassed Britain’s economy in 1987. The milestone is being hailed as  confirmation that Italy has proved its resilience.

For more stories about Italy or United Kingdom, visit the corresponding categories.

• iShares MSCI Italy Index (NYSEArca: EWI): up 30% year-to-date

• iShares MSCI United Kingdom (NYSEArca: EWU): up 33.5% year-to-date