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

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.

Analysts are out making the case for Europe to be the next comeback story. Why?

• Some investors believe Europe is best positioned to benefit from a recovery in share prices over the next year or two, as European economies benefit from favorable monetary policy and companies projecting higher earnings, reports Dave Kansas for The Wall Street Journal.

• Valuations in European stocks have not been stretched too far. The average P/E ratio in Europe is around 16. The price-to-book ratio shows that stocks are trading about 15% under long-term averages. Additionally, historic trends shows the attractiveness of dividend yields as compared to government bond yields.

• Major European markets have jumped from their March lows. Investors are putting more money into European stocks, with inflows exceeding outflows by $2.1 billion.

• U.S. investors are also capitalizing on the weaker dollar by investing in foreign markets. The falling dollar as a result of monetary and fiscal policies will make gains in overseas markets more attractive when investors repatriate the investments, providing a “dollar kicker.”

Still, potential investors should note that Europe’s banking system remains fragile, economic activity is highly uneven and several countries are still grappling with difficult fiscal situations. The main concern in Europe is its financial system. Those outside of Europe feel that European banks are undercapitalized and banking is a large characteristic of Europe’s economy. Chief economist Carl Weignberg at High Frequency Economics also warns of possible deflationary risks.

• iShares MSCI EMU Index (NYSEArca: EZU): up 33.8% year-to-date

• SPDR DJ Euro STOXX 50 (NYSEArca: FEZ): up 30.6% year-to-date

• PowerShares FTSE RAFI Europe (NYSEArca: PEF): up 56.9% year-to-date

For more information on Europe, visit our Europe category.

Max Chen contributed to this article.

The 16-nation eurozone’s private sector posted a record move today, and purchasing managers say that the economy stabilized this month. William L. Watts for MarketWatch reports that the preliminary Markit composite purchasing managers’ index for the eurozone rose to a 15-month high of 50 in August, from 47 in July. The record monthly jump exceeded economists’ expectations for a rise to 48.3.

August officially ended the 14-month drag of readings under 50, signaling a beginning to a new pattern. Reuters reports that the end to the contraction is indicative of improving economic conditions.

There are numerous ways to play the eurozone. Several single-country ETFs exist for investors who want to bet on certain specific markets, such as France or Germany. For broader exposure that allows investors to access the growth of the region as a whole, there are a few European  ETFs on the market, as well.

Be sure to look at the underlying holdings to be sure you’re getting the country exposure you want:

• iShares MSCI EMU Index (EZU): up 13% year-to-date

• SPDR DJ Euro STOXX 50 (FEZ): up 12.3% year-to-date

For more stories about Europe, visit our Europe category.

The primary reason so few banks have accepted government funds is that they’re wary of the signal it could send to financial markets. Other banks believe that they have sufficient capital or can meet the capital ratio requirements needed to weather the storm, reports Carter Dougherty for The New York Times.

Investors think that the financial stocks, especially ING, will end up with more government stakes in them before the financial crisis is over. There was no rush for Europe to nationalize this week, either.

The iShares MSCI EMU Index (EZU) is down 46.9% year-to-date.

The French bank, Groupe Caisse d’Épargne, reported that they lost $807 million as of Friday, by unauthorized trading of derivatives by a team on the bank’s own responsibility. Matthew Saltmarsh for The New York Times says the lender reported the loss a result of crazy market volatility last week and the position is closed.

The speculation of the losses due to big derivatives losses at such as large bank echoed through the Paris exchanges and put downward pressure on the banks’ shares.

One thing that could aid France in this downturn is the fact that there, it’s much harder to spend what you don’t have, reports John Laurenson for Marketplace. Qualifying for a mortgage there can involve proving you’re healthy and getting a life insurance policy.

That doesn’t mean all is well there – the housing market is bearish and thousands of restaurants and cafes have gone out of business – but France’s banking system is a little more trustworthy than most.

iShares MSCI France (EWQ) is down 43.5% year-to-date.

Borrowing costs were left at 4.25% by the European Central Bank, while the Bank of England held its benchmark rate at 5%, reports Carter Dougherty for the New York Times. The ECB said it would have inflation under control by 2010, something many Europeans could be looking forward to.

The ECB expects euro zone growth to hit 1.4% this year, and 1.2% for 2009. Inflation is forecast to be 3.5% for this year and 2.6% for next year. Financial market turmoil is bubbling over into Europe, with housing market downturns, soaring commodity and energy prices affecting daily lives, and weak economic activity in many places.

When a recovery shows up, the Dow Jones Euro Stoxx (FEZ) fund might be a way to capitalize. The ETF is made up of an index that tracks 50 Eurozone companies, of which are market leaders within their sectors. To clarify, the Eurozone includes most countries in Western Europe except the United Kingdom. Some of the largest companies in Europe are included in this ETF.

While Germany and France make up around 64% of the portfolio, 32% of the entire fund is in the financials sector. The expense ratio is at 32% which is fair for the immense exposure. The assets are only at $279 million, reports David Hunkar for Seeking Alpha.

Europe and the Eurozone countries are feeling the side effects of the credit crisis, with a slower-than-expected growth outlook for the entire economy, according to the Organization for Economic Development.

Other diversified ways to get European exposure when the time is right:

• iShares MSCI EMU Index (EZU): down 24% year-to-date; France, 28.5%; Germany, 25.8%; Spain, 11.9%; Italy, 10.7%
• Vanguard European Stock (VGK): down 19.6% year-to-date; United Kingdom, 30.8%; France, 14.3%; Germany, 12.9%; Switzerland, 10.2%; Spain, 5.9%
• PowerShares FTSE RAFI Europe Portfolio (PEF): down 21.7% year-to-date; United Kingdom, 32.2%; France, 16.4%; Germany, 14.4%; Switzerland, 7.4%

There are more than 160 U.S.-based products within this fund family, and they represent $327 billion in assets as of early May, reports Hannah Glover for Ignites.

As of late Friday, all but two of the ETFs were trading at $100 per share or higher. July 24th is the magic date when shares for 16 ETFs will start trading at a split-adjusted rate. Shareholders on record as of July 21 will see the adjusted number of shares in their brokerage account change as of July 28. these spits range form a 2-for-1 to a 10-for-1 according to the product.

Share splits will lower the price of shares to make them more accessible for individual investors and offer more liquidity to investors. It’s mostly a psychological move that’s merely a sign of success for an ETF or stock. Most stocks and ETFs prefer to trade under $100 to help them retain their attractiveness.

The shares splitting are:

Genentech (DNA) this week upped its 2008 forecast, and also said its second-quarter profit rose 4.7%, thanks to high sales of a drug that treats tumors, according to the LA Times Business blog. Revenue was up 8%. The drug, Avastin, is used to treat colon, breast and lung cancer. It’s being studied against 20 other tumor types, as well.

Genentech is the biggest maker of cancer drugs in the United States.

Johnson & Johnson (JNJ) also announced a record amount of second-quarter sales at $16.5 billion, and profits of $3.3 billion. The numbers owed much to sales overseas, reports Rob Wherry for Smart Money.

As evidence of the vast applications of the biotechnology sector, a roundtable conference was held to address the food crisis in sub-Saharan Africa. In Nigeria, agricultural growth is put at 4.5%, far below the growing demand for food there. The Minister of Science and Technology Chief called for increased use of genetically modified crops, which are being developed by the National Biotechnology Development Agency, reports Ekene Ezugwu for All Africa.

• Biotechnology HOLDRs (BBH): up 7.2% year-to-date; Genentech is 38.7%
• iShares S&P Biotechnology (IBB): down 0.9% year-to-date
• PowerShares Dynamic Biotech & Genome (PBE): down 5.1% year-to-date; Genentech is 4.7%

But now steel may have hit a breaking point: it’s become so expensive that major construction projects around the world, investments in shipbuilding and oil-and-gas exploration are slowing down or halting altogether. Some countries are hoarding steel, and others are cutting import taxes to attract more of it.

All over the world, major projects have begun to feel the pinch, reports Robert Guy Matthews for the Wall Street Journal. And it might lead to a backlash against steelmakers.

In Turkey, one construction association said it will start a 15-day strike to pressure steelmakers to cut prices. In New Delhi, India, a bridge project has been put on hold. Housing for the poor has been postponed. In Venezuela, the largest steelmaker is limiting exports.

While the appetite for steel is still voracious and shows no signs of slowing, the CEO of ArcelorMittal (MT.AS) says that steelmakers are worried that the high prices will eventually impact demand, so the industry is taking steps to cut some costs. Some of the moves include layoffs and acquiring mines.

Since December, steel prices are up between 40% and 50%. Year-to-date, the Market Vectors Steel (SLX) is up 28.7%. ArcelorMittal is 14.1% of the fund.