Europe ETFs: Who's Hot, Who's Not | ETF Trends

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.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.