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According to a CNBC article, the Eurozone economy grew slightly by 0.1% in the first quarter of 2023 after a flat fourth quarter, but missed the market consensus of a 0.2% expansion. This comes as Germany's GDP remained stagnant during the same period.
Eurozone's 0.1% growth in Q1 2023 occurred amid high inflation, driven by energy prices due to supply constraints caused by Russia's invasion of Ukraine. However, fiscal stimulus, warmer weather, and lower energy prices helped the bloc avert a winter recession.
Eurozone growth is challenged by disparities between individual countries. Experts say that the region's growth prospects will be influenced by the ongoing race between positive momentum in industry and wage growth, as well as the European Central Bank monetary tightening and U.S. recession risks.
Germany’s Growth Stagnates
As per a Reuters article, Germany technically avoided a recession by a narrow margin against the backdrop of persistent high inflation, rate hikes and a likely recession in the United States in the second-half of the year.
Germany's economy faced a stagnant performance in the first quarter, with declines in government and household consumption offset by increases in exports and capital investment. This followed a revised 0.5% contraction in the fourth quarter of 2022 compared to the previous quarter, which reignited concerns of a technical recession.
The German government, however, raised its economic growth forecast for the current year to 0.4% from the previously estimated 0.2%. The German Economy Minister Robert Habeck, as quoted on the Reuters article, said that growth is likely to be accelerated after the first quarter despite a difficult environment, with gradual economic recovery expected to be underway.
How Have Other Economies in the Eurozone Performed?
France's economy grew by 0.2% in the first quarter, despite widespread strikes triggered by President Emmanuel Macron's proposed pension reforms. Meanwhile, Irish GDP experienced a decline of 2.7% in the previous quarter, while Portugal's economy grew by 1.6%.
With the upcoming meeting of the European Central Bank on May 4, to address the headline and core inflation, GDP figures of the economy become relevant.
ECB policymakers weighing a 25 or 50 basis point interest rate hike are concerned about possible setbacks due to the March collapse of several lenders across Europe and the United States. ECB recently raised its three key interest rates by 50 basis points in March, taking the main rate to 3%. In spite of officials highlighting the strength of the European economy, deposit flights and volatility remain as concerns.
ETFs in Focus
Despite these challenges, the Eurozone appears to have steadied nerves, with officials optimistic about the sector's resilience. However, there remains a sense of caution and the need for ongoing vigilance to navigate the uncertainties. Below we highlight a few ETFs with exposure to the Eurozone.
The fund tracks the performance of the FTSE Developed Europe All Cap Index, which measures the stocks of companies located in major European markets. With a passive strategy in play, the fund has 1328 securities in its basket.
The top three markets where the fund has allocated its fund are the United Kingdom (24.24%), France (17.17%) and Switzerland (14.23%). VGK has major investments in the industrials and financial sector with a share of 17.05% and 16.39%, respectively.
Having amassed an asset base of $19.11 billion, the fund charges an annual fee of 0.08%. VGK has a Zacks ETF Rank #4 (Sell) and a Medium risk outlook. VGK has given a return of 14.90% year to date and 12.54% over the past year.
The fund seeks to track the investment results of the MSCI EMU Index composed of large and mid-capitalization equities from developed market countries that use the Euro as their official currency. It has 229 securities in its basket, with consumer discretionary (16.98%), financials (16.94%) and industrials (15.8%) taking the top spots.
EZU has major allocations in France with 37.23%, followed by Germany with 25.31% and the Netherlands with 12.75%. The fund has gathered $7.76 billion in its asset base and charges an annual fee of 0.52%.
It has a Zacks ETF Rank #4 (Sell) with a Medium risk outlook. EZU has gained 17.85% year to date and given returns of 19.22% over the past year.
The fund seeks to track the investment results of an index composed of large, mid and small-capitalization European equities. With a basket of 1,019 securities, the fund has major exposure of 16.67% in the financial sector, followed by industrials holding 15.77% and healthcare at 14.79%.
IEUR has the top allocation in the United Kingdom, with 23.21%. The following spots are taken by France and Switzerland, with 17.74% and 14.51%, respectively. The fund has amassed an asset base of $4.46 billion, charging an annual fee of 0.09%.
It has a Zacks ETF Rank #4 (Sell) with a Medium risk outlook. IEUR has earned 14.86% year to date and 12.49% over the past year.
The fund seeks investment results that closely correspond to the performance of the Morningstar Developed Europe Target Market Exposure Index, which consists of equity securities of developed European nations. It holds a basket of 465 securities with financials taking the top spot, having 16.4% share of the assets, followed by healthcare and industrials with 16.1% and 15.7%, respectively.
BBEU has major investments of 22.3% and 16.8%, respectively, in the United Kingdom and France. It has amassed around $9.53 billion in its asset base, while charging an annual fee of 0.09%.
It has a Zacks ETF Rank #4 (Sell) and has earned 15% year to date. The fund has also gained 13.75% over the past year.
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ETFs to Watch as Germany's Q1 GDP Hurts Eurozone
According to a CNBC article, the Eurozone economy grew slightly by 0.1% in the first quarter of 2023 after a flat fourth quarter, but missed the market consensus of a 0.2% expansion. This comes as Germany's GDP remained stagnant during the same period.
Eurozone's 0.1% growth in Q1 2023 occurred amid high inflation, driven by energy prices due to supply constraints caused by Russia's invasion of Ukraine. However, fiscal stimulus, warmer weather, and lower energy prices helped the bloc avert a winter recession.
Eurozone growth is challenged by disparities between individual countries. Experts say that the region's growth prospects will be influenced by the ongoing race between positive momentum in industry and wage growth, as well as the European Central Bank monetary tightening and U.S. recession risks.
Germany’s Growth Stagnates
As per a Reuters article, Germany technically avoided a recession by a narrow margin against the backdrop of persistent high inflation, rate hikes and a likely recession in the United States in the second-half of the year.
Germany's economy faced a stagnant performance in the first quarter, with declines in government and household consumption offset by increases in exports and capital investment. This followed a revised 0.5% contraction in the fourth quarter of 2022 compared to the previous quarter, which reignited concerns of a technical recession.
The German government, however, raised its economic growth forecast for the current year to 0.4% from the previously estimated 0.2%. The German Economy Minister Robert Habeck, as quoted on the Reuters article, said that growth is likely to be accelerated after the first quarter despite a difficult environment, with gradual economic recovery expected to be underway.
How Have Other Economies in the Eurozone Performed?
France's economy grew by 0.2% in the first quarter, despite widespread strikes triggered by President Emmanuel Macron's proposed pension reforms. Meanwhile, Irish GDP experienced a decline of 2.7% in the previous quarter, while Portugal's economy grew by 1.6%.
With the upcoming meeting of the European Central Bank on May 4, to address the headline and core inflation, GDP figures of the economy become relevant.
ECB policymakers weighing a 25 or 50 basis point interest rate hike are concerned about possible setbacks due to the March collapse of several lenders across Europe and the United States. ECB recently raised its three key interest rates by 50 basis points in March, taking the main rate to 3%. In spite of officials highlighting the strength of the European economy, deposit flights and volatility remain as concerns.
ETFs in Focus
Despite these challenges, the Eurozone appears to have steadied nerves, with officials optimistic about the sector's resilience. However, there remains a sense of caution and the need for ongoing vigilance to navigate the uncertainties. Below we highlight a few ETFs with exposure to the Eurozone.
Vanguard FTSE Europe ETF (VGK - Free Report)
The fund tracks the performance of the FTSE Developed Europe All Cap Index, which measures the stocks of companies located in major European markets. With a passive strategy in play, the fund has 1328 securities in its basket.
The top three markets where the fund has allocated its fund are the United Kingdom (24.24%), France (17.17%) and Switzerland (14.23%). VGK has major investments in the industrials and financial sector with a share of 17.05% and 16.39%, respectively.
Having amassed an asset base of $19.11 billion, the fund charges an annual fee of 0.08%. VGK has a Zacks ETF Rank #4 (Sell) and a Medium risk outlook. VGK has given a return of 14.90% year to date and 12.54% over the past year.
iShares MSCI Eurozone ETF (EZU - Free Report)
The fund seeks to track the investment results of the MSCI EMU Index composed of large and mid-capitalization equities from developed market countries that use the Euro as their official currency. It has 229 securities in its basket, with consumer discretionary (16.98%), financials (16.94%) and industrials (15.8%) taking the top spots.
EZU has major allocations in France with 37.23%, followed by Germany with 25.31% and the Netherlands with 12.75%. The fund has gathered $7.76 billion in its asset base and charges an annual fee of 0.52%.
It has a Zacks ETF Rank #4 (Sell) with a Medium risk outlook. EZU has gained 17.85% year to date and given returns of 19.22% over the past year.
iShares Core MSCI Europe ETF (IEUR - Free Report)
The fund seeks to track the investment results of an index composed of large, mid and small-capitalization European equities. With a basket of 1,019 securities, the fund has major exposure of 16.67% in the financial sector, followed by industrials holding 15.77% and healthcare at 14.79%.
IEUR has the top allocation in the United Kingdom, with 23.21%. The following spots are taken by France and Switzerland, with 17.74% and 14.51%, respectively. The fund has amassed an asset base of $4.46 billion, charging an annual fee of 0.09%.
It has a Zacks ETF Rank #4 (Sell) with a Medium risk outlook. IEUR has earned 14.86% year to date and 12.49% over the past year.
JPMorgan BetaBuilders Europe ETF (BBEU - Free Report)
The fund seeks investment results that closely correspond to the performance of the Morningstar Developed Europe Target Market Exposure Index, which consists of equity securities of developed European nations. It holds a basket of 465 securities with financials taking the top spot, having 16.4% share of the assets, followed by healthcare and industrials with 16.1% and 15.7%, respectively.
BBEU has major investments of 22.3% and 16.8%, respectively, in the United Kingdom and France. It has amassed around $9.53 billion in its asset base, while charging an annual fee of 0.09%.
It has a Zacks ETF Rank #4 (Sell) and has earned 15% year to date. The fund has also gained 13.75% over the past year.