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Everything You Should Know About Europe in 500 Words

Look, I know we are all sick and tired of Europe. Its growth sucks, its debts are large, and the story hasn’t really changed. But it’s important for the global economy and the U.S. stock market, so I’ll do the best I can to update you in about 500 words or so:

Sentiment Bad, But Better: Euro watchers were thrilled by the ZEW business expectations survey this week. German investors showed continued pessimism, but the index reading blew away January’s number and the forecasts. That’s saying something, considering January numbers were the highest since 2010.
Verdict: Very Good for Europe

What Currency Wars? Some thought the bigshot group of 20 nations would cracking down on those devaluing their currency. But the G-20 basically did nothing over its recent two-day meeting. Since the European Central Bank hasn’t been as aggressive as other nations (like Japan lately), that means their exports will continue to be less competitive and growth will get squeezed.
Verdict: Bad for Europe

About That Growth …: Looking back at 2012, The eurozone saw even worse growth than expected, with a 0.5% contraction in GDP across the year and a 0.6% decline in Q4. It was the first full year since 1995 in which not a single quarter of growth was recorded.
Verdict: Disappointing, but old news for investors

IPOs to Offset Debt?: Thomson Reuters reports European deals through mid-February are running roughly half of 2012’s pace. But a fascinating trend could be emerging in Europe to juice the M&A market: indebted companies tapping public markets for capital thanks to $430 billion in corporate debt across Europe. This could be a plus for investors who can get into the profitable businesses that are carved up from indebted conglomerates, and big deals could do a lot for confidence as EU equity markets slog higher.
Verdict: A plus for European sentiment … If deals happen, that is

A Step Toward Euro Bonds: The European Commission agreed to study “a debt redemption fund for eurozone countries,” according to That could be a crucial step toward mutually guaranteed eurozone bonds, which do away with the problem of a shared currency but different debt offerings. Any formal change is a long way off, with concerns that include Germany’s staunch opposition, among many other things. But it’s good to see that euro bonds are still in the discussion.
Verdict: No immediate impact, but nice to hope for.

So there you have it. European equities have been doing pretty well over the last year or so, all things considered, so there’s no immediate signs that will end anytime soon.

If you bought into Europe during the lows last summer, you could be sitting on some big gains. The iShares MSCI Germany Index Fund (NYSE:EWG) is up 28% since July 1 — more than double the S&P 500 — thanks to high-flying components that include Siemens (NYSE:SI), SAP (NYSE:SAP) and BASF (PINK:BASFY), among others. The broader Vanguard MSCI Europe ETF (NYSE:VGK) isn’t up as much, but still has significantly outperformed with almost 18% gains.

If you think you have better investments out there, feel free to take some partial profits and shop around. But a better question is that, considering the alternatives out there … what else would you move your money into?

Because even if the momentum is waning in Europe, there are serious concerns it could be waning elsewhere, too.

Jeff Reeves is the editor of and the author of “The Frugal Investor’s Guide to Finding Great Stocks.” Write him at or follow him on Twitter via @JeffReevesIP. As of this writing, he did not own a position in any of the stocks named here.

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