Financial markets are feeling a little sick these days, and the source of the recent ailment comes straight from across the pond. Since mid-January, European stocks are down sharply, with the SPDR Euro Stoxx 50 ETF (FEZ) sinking nearly 5% in just over two weeks. That decline has put pressure on stocks here at home, and around the globe.
Fueling the decline in European blue chips is a host of negatives, including fears of a contagious emerging-market currency meltdown capable of stymieing a recovery. Perhaps more importantly, there’s now fear of disinflation, and even downright deflation, coming from the EU.
On Friday, we received data out of Europe showing that EU inflation fell to 0.7% in January. That unexpectedly big decline is worrisome for European Central Bank officials because they’ve been attempting to stimulate inflation and stave off any signs of deflation (a contraction in credit and wages) with their current low-interest-rate policies.
Now, with all of the discomfort on the currency and inflation front tamping down Europe, why would you want to consider investing in European stocks right now? Well, if you think the recent wobble in global markets is a temporary circumstance (I do), and if you think the recent pullback in many European stocks also is a short-term adjustment (I do), then buying into some of the best Europe has to offer is a value play that could reap you big benefits.
Here are three European stocks to buy on the Old World’s market dip.