Europe may be getting more attention from investors in light
of higher U.S. interest rate prospects. European economies
have not accelerated as much as in the U.S. Therefore,
European governments probably won’t be raising rates.
A strong euro is one reason some investors have under-weighted
European stocks, because a strong currency hurts exports. The
euro, in turn, has been strong in part because of relatively
high interest rates in Europe. Investors are attracted to
higher interest rates (higher yields), which drives up the
currency.
Now, with U.S. rates likely to rise and much of Asia pegged
to the U.S., Europe could see the euro weaken, as its interest
rates lag in appeal. A weaker currency would help multi-national
companies based in Europe. Generally, European stocks may have
only modest growth prospects but they can be attractive at
current valuations.
