By Steve Goldstein
U.S. investors have stepped up their purchases of European stocks — even as performance this year has been neck-and-neck with what they can get domestically.
On Wednesday, European stock exchange-traded funds — the JPMorgan BetaBuilders Europe ETF (BATS:BBEU) , the iShares MSCI Eurozone ETF (BATS:EZU) and the Vanguard FTSE Europe ETF (PSE:VGK) — accounted for three of the top eight stock funds purchased by U.S.-based investors.
So far in May, $4 billion in flows have been sent to European ETFs, the best month for the region since March 2015, said Matthew Bartolini, head of SPDR Americas research at State Street Global Advisors.
“Europe has a lot of things going for it right now in terms of why investors might want to consider it,” Bartolini said.
He said in the first phase of the recovery, ETF investors went into sector funds and small-cap style, and now they’re moving into Europe as capacity limitations and lockdown restrictions are being removed.
On State Street’s numbers — using a combination of price-to-earnings, price-to-sales and price-to-book — European stock valuations, compared to the S&P 500 and over the last 15 years, are in the bottom one percentile. The still-unallocated European Union recovery fund, as well as rising global travel, also should help the region, he said.
Analysts at Jefferies say their tracker of European activity was at 85% of pre-COVID-19 levels. “The euro area economy continues to bounce back, with the latest Ifo [Institute for Economic Research] and INSEE [National Institute of Statistics and Economic Studies] surveys indicating a significant improvement in business confidence in Germany and in France, led by the services sector,” they said, recommending payments company Adyen, (AMS:NL:ADYEN) , payments-focused bank Nexi (MIL:IT:NEXI) and automobile maker Stellantis (NYS:STLA) as ways to play the recovery.
That said, stock-market performance has been roughly the same on both sides of the Atlantic. In dollar terms, the Stoxx Europe 600 has climbed 12% in 2021, as has the S&P 500 (S&P:SPX) .
The broader market was again languid on Thursday. The Stoxx Europe 600 (STOXX:XX:SXXP) rose 0.5%, as U.S. stocks opened higher.
Airbus (PAR:FR:AIR) shares jumped 10%, as the plane maker set out plans to increase production. From 45 A320 narrow-body aircraft a month in the fourth quarter, the Boeing (NYS:BA) rival expects to increase production to 64 by the second quarter of 2023 and is investigating opportunities to raise production to as high as 75 by 2025. Airbus also said it would increase production of two other models, the A220, which is the smallest jet it makes, and the A350 long-range jet.
Bayer (ETR:XE:BAYN) shares slumped 4%, after a U.S. judge rejected plans for the company to set aside $2 billion for people who aren’t yet sick or haven’t yet sued after getting cancer from using Roundup weedkiller. Bayer says it might remove the product from the U.S. entirely for retail users.
Tate & Lyle (LON:UK:TATE) shares fell 4%, after forecasting adjusted earnings per share to fall due to lower profitability in its commodities business and an increase in the tax rate, as it also said its artificial-sweetener making primary products unit was still on the market.