ECB Economic Outlook Bright: Grab 4 European Stocks Now

The European Central Bank (ECB) indicated that it will normalize its monetary policy for the 19-nation euro area. This reflects the bank’s underlying confidence on the economic state of the Eurozone.

The bank lifted its growth forecast for the Eurozone on soaring economic confidence across the 19 nations. Europeans continue to feel confident about their financial health, while political risks subside.

Given such a bright assessment of the Eurozone’s economic condition, European stocks leapt to a one-week high on Mar 8. This calls for investing in sound European stocks that can make the most of this optimism.

ECB Makes Positive Change to Policy Outlook

Until now, the ECB has been saying that it is ready to increase the level of quantitative easing (QE) program in both duration and size in order to stimulate the Eurozone economy.

But, this time, it removed such a statement from their communiqué, indicating that stimulus measures will soon come to an end in the Eurozone, a sign that the economy is improving. For now, the ECB’s net asset purchases will continue at a monthly pace of €30 billion until the end of September 2018.

ECB President Mario Draghi, in the meanwhile, added that the Eurozone economy is set to expand at a faster pace than expected. Mike Bell, global market strategist at J.P. Morgan Asset Management, added that due to solid economic growth, “the ECB is likely to feel comfortable ending QE in September.”

The ECB for a long period has maintained the bond purchasing program to keep the Eurozone economy from slipping into recession. However, this time around, the ECB has lifted its 2018 growth forecast to a healthy 2.4%, from 2.3% estimated last December.

Europe is Charging Ahead

The Eurozone economy has, in fact, enjoyed faster growth than the United States in 2017. The Eurozone economy grew 2.4% last year, compared with 2.3% growth in the United States, according to preliminary data from Capital Economics. Stephen Brown, economist at Capital Economics, further added that “the latest business sentiment surveys generally point to a touch stronger growth in the Eurozone than the U.S. at the moment.”

Economic confidence across the 19 nations is currently at its highest in more than 17 years, per a survey published by the European Commission. Carsten Hesse, European economist at Berenberg, added that “confidence levels surged in all surveyed sectors and industrial confidence reached the highest level since the survey started in 1985”.

Jobless rate in the Eurozone continues to fall at a steady clip. In fact, jobless rates fell to 8.7% last November, the lowest since January 2009. Currently, Eurozone has nearly 1.6 million fewer unemployed people than a year ago.

Political Risks Ebb

Europeans are gaining confidence in their economic situation despite political turmoil in several major countries. Germany hasn’t been able to form a new government since its election last September. But, German economic sentiment recently scaled the highest level since 2011, just below the all-time high reached in 1990 when the country had reunified after the fall of the Berlin Wall.

Spain is grappling with the crisis in Catalonia, but the country’s economic confidence is at its highest since early 2001. Italians will vote this month, raising chances of chaos in the region. Yet, Italians are confident about the country’s economic growth. And when it comes to France, Macron’s promise to relax the country’s labor laws, trimming corporate taxes and bringing down the budget deficit bodes well for overall economic growth.

4 European Stocks to Buy Now

With the ECB saying that the Eurozone is no longer in danger, investing in solid stocks from the region seems judicious. We have, thus, selected four stocks that flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy) and a Zacks Investment Research

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Written By: Zacks Investment Research