European Equities Offer an Alternate Play on U.S. Economic Data

Traders may use European equities as an alternate play when U.S. economic data is released. When considering leverage, they can use the Direxion Daily FTSE Europe Bull 3X ETF (EURL).

The fund is up 14% the past year, largely following the U.S. equities rebound after a dismal 2022. Capital markets are expecting the U.S. Federal Reserve to cut interest rates this year. Still, the release of economic data can confirm that loose monetary policy move.

“Global investors are looking ahead this week to the release of the latest U.S. inflation data and big bank earnings for further clues on the state of the economy, and the path of rate cuts from the Federal Reserve,” reported CNBC.

Some strategists were already anticipating European equities to move higher in 2024. This opens up bullish opportunities for traders in the Eurozone. Right now, U.S. equities are feeling an initial lull. Hopefully, this is a pullback before the “January Effect” eventually takes over and more buying occurs. When upside hopefully takes over, European equities could pull ahead if strategists’ forecasts prove correct.

“We are generally quite positive on next year,” Maximilian Uleer, head of European equity and cross-asset strategy at Deutsche Bank, told CNBC in mid-December 2023. “Three weeks ago we called for an overweight in Europe. It’s more of a tactical view, we think that’s going to work out better in the first half of the year than in the second one.”

“Surprise Indices” Better in Europe

Uleer noted that “surprise indices,” a measurement of how much economic data beats or misses forecasts, have been picking up in Europe. Meanwhile, U.S. has been faltering. Additionally, Ankit Gheedia, head of equity strategy at BNP Paribas, deemed how data reacts to inflation figures and other economic data “more interesting.”

“When you see the economic surprise difference between Europe and U.S., that tends to correlate well between Europe and U.S. equity outperformance. Middle of this year, outlook and sentiment for European economy was quite poor. Things are getting less bad right now,” said Gheedia.

With its triple leverage, EURL seeks daily investment results that are equal to 300% of the daily performance of the FTSE Developed Europe All Cap Index. The index itself is a market capitalization-weighted index. EURL’s design measures the equity market performance of large-, mid-, and small-cap companies in developed markets in Europe.

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