“Several factors have supported growth. Political risks to the eurozone eased following the French elections, business confidence has risen, export demand has improved, and monetary policy support for the economy has gained further traction (credit standards for loans to enterprises eased in 2Q17, according to the ECB’s July bank lending survey). Falling unemployment, which hit an eight-year low of 9.1% in June, has boosted consumer confidence,” adds Fitch.
The ratio of Eurozone earnings upgrades relative to downgrades is at its highest level since 2010, with net upgrades still rising, reflecting the best Eurozone earnings season for beats in seven years. Looking ahead, profitability estimates for European corporations have been improving since the summer of 2016 but remain below 50% their peak pre-crisis levels, which suggests there is more room to run.
Investors that believe the euro is poised to retreat after surging for most of this year and are bullish on the Eurozone’s outlook can turn to currency-hedged ETF options, such as the the Deutsche X-trackers MSCI EMU Hedged Equity ETF (NYSEArca: DBEZ), iShares Currency Hedged MSCI EMU ETF (NYSEArca: HEZU) and WisdomTree Europe Hedged Equity Fund (NYSEArca: HEDJ). These currency-hedged Europe ETFs may outperform non-hedged Europe funds if the euro continues to depreciate against the U.S. dollar.
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