The Euro Stoxx 50 Index has performed well this year. It is up more than 11% and is now at its highest level since 2007. The index has moved in line with its US counterparts such as the Dow Jones, Nasdaq 100 and S&P 500.
european stocks are cheap
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There are three main reasons why the Euro Stoxx 50 index performed well in 2023, despite monetary policy tightening by the European Central Bank (ECB).
First, the rally is mainly due to the strong performance of the European economy this year. The main proposition among investors in December and January was that most European countries would go into recession.
He argued that most countries would suffer from higher natural gas prices. The opposite happened and natural gas fell to its lowest level since 2021. This decline helped bring down the bloc’s inflation and boost productivity.
Second, the Euro Stoxx 50 index rose on the perception that European equities were undervalued. The index has a PE ratio of 13.99 and a dividend yield of 2.78%. On the other hand, the PE multiple of the S&P 500 is 22.2. Hence value investors believe that these stocks are cheap.
Third, most of the companies in the index have benefited from the reopening of the Chinese economy. Many of the companies included in the index do a lot of business in the country.
Adidas is the best performing stock in the Euro Stoxx 50 index with a gain of over 38%. Other top performers included Inditex, Philips, CRH, Hermes, BMW, ASML and SAP. All of these stocks are up more than 30%.
adidas stock is doing well, while the misery continues with kanye west, ASML grew as more companies increased their investment in semiconductor manufacturing.
On the other hand, the worst performing companies in the Euro Stoxx 50 index are Vonovia, TotalEnergies, BASF and AB InBev.
Forecast Euro Stocks 50
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Stocks 50 Chart by TradingView
The Eurostox 50 index has performed well in recent months. Recently, however, the index found strong resistance at $4,395 where it formed a triple-top pattern. When analyzing price action, this pattern is usually a bearish signal.
The index declined slightly below the 50-day EMA but took support from the 100-day EMA. Hence, the outlook for the Stoxx index is currently neutral with a bearish bias. A move below the 100-day moving average indicates that there are more sellers in the market. More gains were confirmed as the EUR 50 index moved above the resistance point of $4,395. If this happens, it opens up the possibility of a rise in the index to $4,500.