Data released this month showed that the Eurozone has grown for the first time since the third quarter of 2011. GDP for the 17-nation economic union increased by 0.3%, according to data released this month. This marks an end to the recession plaguing the region, which had suffered a 0.3% decline even in the first quarter of 2013.
Positive GDP Data
The resurgence was led by the two largest economies of the continent, Germany and France. Germany grew by 0.7% in the second quarter, the same as the rate in the first quarter of 2012. The British economy grew at the same rate, maintaining the rate achieved in the third quarter of 2012.
France grew by 0.5%, ending the recessionary conditions prevailing in that country. Recessionary conditions have also eased for the economies of Italy and Spain, who are third and fourth in terms of size.
According to London-based financial data company Markit, the services index for the region increased from 49.8 in July to 51 in August. The manufacturing index increased from 50.3 to 51.3. The monthly composite PMI, which is an indicator for both services and manufacturing increased from 50.5 to 51.7.
Additionally, consumer confidence has also increased this month, to the highest level in more than two years. According to the European Commission, consumer confidence for the Eurozone nations increased from -17.4 to -15.6. The index has now increased successively over a period of nine months.
The Rise of Emerging Markets
Data released by index provider MSCI shows that indices in Central and Eastern Europe have risen by 1.2% in the last three months. This is especially significant, considering that emerging markets as a whole have slumped by nearly 7.5%. Excluding Russian companies, which have been hit by plummeting commodity prices, markets in these regions have gained 2.3%.
Macroeconomic indicators support these developments. Hungary’s trade surplus has increased by 6 billion euros from the year-ago period. Poland’s retail sales have grown by 4.3% for July, compared to the same month last year. Additionally the Czech economy has emerged from a recession, growing by 0.7% from the earlier quarter.
Mutual Fund Picks
Vanguard European Stock Index (VEURX)
Launched in June 1990, this is the largest of our choices with net assets of $11.67 billion. It also has a relatively high minimum initial investment requirement, of $3,000. This is an index fund which tracks the FTSE Developed Europe Index. The index primarily consists of stocks issued by companies from the U.K., France, Germany and Switzerland.
The mutual fund holds 508 securities in all. It is widely diversified and its top 10 holdings make only 19.47% of its assets. Its top 3 holdings include Nestle SA, HSBC Holdings plc (HBC) and Roche Holding AG. The fund returned 27.08% over the last one year period and has a Zacks Rank #1(Strong Buy).
T. Rowe Price European Stock (PRESX)
With net assets amounting to $885.95 million, the fund was also founded in 1990. This fund focussing on investing in European companies regardless of their size. It has a higher minimum initial requirement of $2,500.
This fund holds a total of 76 securities. Its top 10 holdings account for 20.41% of its assets. Its top three assets are Royal Dutch Shell PLC (RDS.B), Anheuser-Busch InBev SA/NV (BUD) and GlaxoSmithKline plc (GSK). The fund returned 33.56% over the last one year period and has a Zacks Rank #1 (Strong Buy).
Henderson European Focus A (HFEAX)
The youngest of our picks, launched in August 2001, this is also relatively smaller in terms of assets. Total assets of the fund amount to $703.25 million. The fund focuses on investing in equity securities of European companies. It may concentrate it assets in a single or small number of countries and has a minimum initial requirement of $500.
The fund has a total number of 65 assets. The asset it is most invested in is European Aeronautic Defence and Space Co NV, which makes up 4.63% of its assets. The next two, Kinnevik, Investment AB and Accor SA together make up 7.50% of its assets. The fund returned 32.19% over the last one year period and has a Zacks Rank #1 (Strong Buy).
Europe seems to be on a firmer footing now on the economic front. Moreover, its emerging economies hold promise. These mutual funds will therefore make excellent additions to your portfolio.
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