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Economic sentiment in the Eurozone inched upward in November to their highest level in a year. The results of the monthly survey conducted by the European Commission (EC) sent out a positive signal about the region’s economy ahead of the ECB’s crucial policy meeting scheduled for Dec 8.

Additionally, consumer expectations of inflation over the next 12 months rebounded. A separate survey from IHS Markit released last week showed that the economic bloc’s PMI had surged to a record high over November. These reports indicate that this may be a good time to add stocks from the area to your portfolios.

Economic Sentiment Rises

The EC’s Economic Sentiment Indicator moved up to 106.5 for November from the level of 106.4 recorded in October. This is the highest level recorded since Dec 2015. Meanwhile, manufacturer’s expectations of selling price increased from 3.5 in October to 4.8 in November. This is the third successive monthly increase for the metric. Further, inflation expectations among consumers for the coming 12 months have rebounded to 6.3 in November after declining to 4.3 in October.  

According to the survey, optimism among manufacturers declined compared to the level witnessed last month. In contrast, the retail and construction sectors had grown more upbeat this month, as had consumers. Meanwhile, the economic bloc has been threatened by two related factors. Fears have arisen that Britain’s surprise exit from the EU will lead to a significant fall in the value of the pound which could hurt exports from the region.

Additionally, there are indications that trade protectionism is on the rise across the world. Political uncertainty across the Eurozone has also increased significantly. The degree of economic resilience witnessed in the face of such uncertainty indicates that the area’s economic recovery remains on track and could even have firmed in the year’s last quarter.

Eurozone PMI Increases, Draghi Focuses on Resilience

Meanwhile, an IHS Markit survey released last week suggests that Europe’s economy has grown at the sharpest pace for the year in November. Markit’s flash composite Eurozone PMI increased to 54.1 in November, the highest level witnessed in 11 months. This is substantially higher than the reading of 53.3 for the month of October.

Additionally, growing order books had resulted in companies hiring additional workers at the sharpest pace in more than eight years. Prices had also moved upward in a signal that inflationary pressures were at their highest in more than five years.

Speaking to an EU parliamentary committee on Nov 28, ECB President Mario Draghi underlined the adverse impact of economic and political uncertainty on the Eurozone. However, Draghi was quick to point out that the economic bloc had shown significant resilience in the wake of such pressures. Draghi also said that inflation was rising and stressed that the ECB’s monetary stimulus measures were significantly responsible for the area’s recovery.

Our Choices

Recently released economic data indicates that the Eurozone’s economic recovery on track. In fact, growth is expected to pick up pace during the last quarter of the year.

Picking select European stocks makes good sense at this point. We have narrowed down our search based on a good Zacks Rank and other relevant metrics.

Deutsche Lufthansa Aktiengesellschaft (DLAKY - Free Report) operates as an autonomous unit within the Lufthansa Group. Headquartered in Cologne, Germany, it maintains its own stations, handling check-in, ticket sales and other services at all the major international airports.

Lufthansa has a Zacks Rank #1 (Strong Buy). The forward price-to-earnings (P/E) ratio for the current financial year (F1) is 4.88, lower than the industry average of 9.91. Its earnings estimate for the current year has improved by 39.1% over the last 30 days.

Valeo SA (VLEEY - Free Report) is a designer, producer and seller of components, integrated systems, and modules for the automobile industry on a global scale. The company is headquartered in Paris, France.

Valeo’s projected growth for the current year is 18%. Its earnings estimate for the current year has improved by 2% over the last 30 days. The stock has a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Aixtron SE (AIXG - Free Report) is a leading provider of deposition equipment to the semiconductor industry headquartered in Aachen, Germany.

Aixtron has a Zacks Rank #2 (Buy) and its projected growth for the current year is 6.9%. Its earnings estimate for the current year has improved by 6.9% over the last 30 days.

Telecom Italia S.p.A. (TI - Free Report) is engaged principally in the communication sector and operates mainly in Europe, the Mediterranean Basin and South America. The company is based in Rome, Italy.

Telecom Italia has a Zacks Rank #2 and its projected growth for the current year is 78.9%. Its earnings estimate for the current year has improved by 46.3% over the last 30 days.

Sequans Communications S.A (SQNS - Free Report) operates as a fabless designer, developer and supplier of 4G semiconductor solutions for wireless broadband applications. The company is based in Paris, France.

Sequans Communications has a Zacks Rank #2 and its projected growth for the current year is 14.2%.

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