Time for Europe ETFs on Stimulus Optimism?
European equities should see a green stretch ahead thanks to the new stimulus and reopening of economies. The European Commission recently unveiled a plan to borrow 750 billion euros ($826.5 billion) on the market and then disburse to EU countries, which will include 500 billion euros in grants and 250 billion euros in loans. This will help them recover from the coronavirus slump.
Out of the 500 billion euros in loans, 310 billion will be deployed in green and digital transitions. The initiative has been viewed as incredible as Germany “had always opposed the idea of jointly-issued debt, even during previous crises,” per CNBC. Austria, the Netherlands, Sweden and Denmark, however, are against the concept of grant. Instead, they support the loan format and seek economic reform commitments in response to any financial aid, CNBC noted.
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. Investors should expect a strict negotiation among countries in the coming days.
In order to finance some of the incremental costs, the European Commission proposed implementing a carbon border duty, a tax on plastics, a common consolidated corporate tax base and a digital tax. It also proposed that the EU budget should receive a bigger share of the Value Added Tax paid by governments to the EU.
Investors should note that apart from the latest stimulus plan, the ECB launched an $820 billion coronavirus package in March. Apart from this, the ECB restarted QE from November 2019 and has a negative interest in place (read: ETFs to Gain on ECB's Coronavirus Emergency Stimulus Rollout).
ETFs to Gain
Given the stimulus optimism, the following ETFs should gain ahead. These ETFs gained at least 1% on May 28, reflecting the stimulus news. Notably, the common currency euro also gained strength and Invesco CurrencyShares Euro Trust FXE added 0.65% on the day.
Winning ETFs in Focus
First Trust Germany AlphaDEX Fund FGM – Up 2.64%on May 28
iShares MSCI Denmark ETF EDEN –Up 2.03% on May 28
iShares MSCI Sweden ETF EWD – Up 2.00% on May 28
ProShares MSCI Europe Dividend Growers ETF EUDV – Up 1.96% on May 28
iShares MSCI Italy Index ETF EWI – Up 1.87% on May 28
iShares Edge MSCI Min Vol Europe ETF EUMV – Up 1.6% on May 28
Vanguard FTSE Europe ETF VGK – Up 1% on May 28
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Invesco CurrencyShares Euro Trust (FXE): ETF Research Reports
iShares Edge MSCI Min Vol Europe ETF (EUMV): ETF Research Reports
iShares MSCI Italy ETF (EWI): ETF Research Reports
Vanguard FTSE Europe ETF (VGK): ETF Research Reports
ProShares MSCI Europe Dividend Growers ETF (EUDV): ETF Research Reports
iShares MSCI Sweden ETF (EWD): ETF Research Reports
First Trust Germany AlphaDEX ETF (FGM): ETF Research Reports
iShares MSCI Denmark ETF (EDEN): ETF Research Reports
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