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Europe Equities Are Hot on Stimulus Optimism: 5 Picks

Tirthankar Chakraborty

Europe equities finished in the green for the third straight trading session on May 27, recovering almost half the losses incurred due to the coronavirus outbreak in the February-March period. 

 

The Stoxx Europe 600 Index went up 0.2% on May 27 and closed at its highest level since Mar 6. What’s more, the broader index is now on track for its best performance in May in a decade. So far this month, the index has risen 2.9%. 

 

Among other primary bourses, the German DAX, France’s CAC 40 index and U.K.’s FTSE 100 were up 1.7%, 1.9% and 1.5%, respectively, on May 27. Shares in peripheral Europe also moved north, with Greece leading the gains with 3.9%. 

 

Individually, shares from nearly all sectors scaled upward. Banking stocks extended gains, with Spain’s Banco Santander’s stock rising 5.6% on May 27. 

 

Airline and travel related stocks also picked up, with TUI Group’s shares surging 27%. Shares of Jet and Deutsche Lufthansa rose 9% and 5%, respectively, while automobile manufacturer Renault witnessed a 17% uptick.

 

So, why did Europe stocks gain in the first place? This is mainly because of growing optimism surrounding the Europe economy’s slow recovery as virus-related lockdown measures are gradually easing with not many new coronavirus cases. 

 

But most importantly, prospects of a coronavirus stimulus package from the European Union boosted investors’ sentiment. In fact, stimulus optimism overshadowed the lingering U.S.-China tensions as well as European Central Bank President Christine Lagarde’s concerns that the Eurozone economy may shrink between 8% and 12% this year.

 

The European Union is widely expected to announce a new fiscal stimulus package of 750 billion euros ($823 billion) in an attempt to protect the Eurozone economy that has been ravaged by the pandemic. 

 

Of the total bailout package, 500 billion euros will be given as grant to member states and another 250 billion euros could be available in loans. Under the proposal, Italy, France and Greece will get 81.8, 39 and 22.5 billion euros, respectively. And in order to fund the bailout package, the European Union will borrow 750 billion euros from financial markets.

 

The money will mostly be used in reforms, while a bulk portion of it will be used to improve healthcare systems in the Eurozone. The fund will also be used to support companies in critical sectors like infrastructure and technology. 

 

The allocation of these funds will be done via the European budget, which is a common basket that receives aids from all 27 member countries and finances various projects across the Eurozone. 

 

Buy These 5 Top European Stocks Now

 

Given Europe stocks’ rally on hopes that the European Union will unveil large stimulus package to reduce the economic fallout from the coronavirus pandemic, investing in the same seems judicious. We have, thus, picked five such stocks that flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy).

 

Bayer Aktiengesellschaft BAYRY is a life sciences company. The company’s segments are Pharmaceuticals, Consumer Health, Animal Health and Covestro. Pharmaceutical products launched over the last few quarters should continue to drive the company’s top line. At the same time, Bayer has made several acquisitions and entered into a number of deals to boost its portfolio in the past few quarters. The company currently has a Zacks Rank #2. The company’s expected earnings growth rate for the current and next year is 5.7% and 15.5%, respectively. 

 

InflaRx N.V. IFRX is a clinical-stage biopharmaceutical company that discovers and develops inhibitors using C5a technology. The company currently has a Zacks Rank #1. The company’s expected earnings growth rate for the current quarter is 10.6%.

 

Legrand SA LGRVF provides electrical and digital building infrastructures. The Zacks Rank #2 company’s expected earnings growth rate for the current year is 10.1%. You can see the complete list of today’s Zacks #1 Rank stocks here.

 

Innate Pharma S.A. IPHA discovers and develops therapeutic antibodies for the treatment of oncology indications. The company currently has a Zacks Rank #2. The company’s expected earnings growth rate for the next year is a staggering 400%.

 

DiaSorin S.p.A. DSRLF develops, manufactures, and distributes immunodiagnostics and molecular diagnostics tests for private and hospital analysis laboratories. The company currently has a Zacks Rank #1. The company’s expected earnings growth rate for the next year is 26.3%.

 

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Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.1% per year. 

 

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InflaRx N.V. (IFRX) : Free Stock Analysis Report
 
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