Recent trading days have hammered equity markets, with the Dow Jones Industrial Average suffering a near 300 point loss on Wednesday alone. As declining stock prices have shattered investor confidence, many have made the trek to long-term fixed-income ETFs, attempting to find safer havens until markets return to a less volatile environment [see Long-Term Bond ETFs: Coming Back In Style]. Against this uncertain backdrop, many are concerned that further signs of weakness in the already down-and-out eurozone could trigger another sharp sell-off.
The common currency area reports its second-quarter GDP growth results later today; many believe that this report could give markets direction -- especially after last week's U.S. GDP results, which came in lower than expected.
So far 2010 has been an interesting year for the eurozone, bringing on its first true crisis as a common currency. Concerns are mounting in several Euro countries as investors grow increasingly concerned that the heavy debt loads will lead to defaults and ongoing financial instability. The crisis initially focused on Greece, with Spain, Portugal, and Italy not far behind, but many of Europe's :stable: economies are also in rough shape.
Despite the cloud of uncertainty lingering over the continent, the GDP growth prediction today is on the right side of zero. Economists expect the 16 country eurozone's GDP to grow between 0.4% and 1%. Experts point to a recovery in the construction industry and strong growth in the manufacturing industries as the main catalysts for the quarter’s positive GDP growth. "We think the second quarter was strong, probably the peak of this part of the recovery," said Stephane Deo at UBS. "Lead indicators are suggesting slower growth from second half 2010 onward, with a marked divergence between individual countries' performance." The German economy, the largest in the eurozone, is expected to lead the way; the forecasted growth rate for the quarter is 1.3% [see BMW Drives German ETF Sharply Higher].
With this major report dropping today, the Vanguard European ETF
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Disclosure: Photo courtesy of Eric Chan. No positions at time of writing.
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