German And Spanish Inflation At Record Low: ETFs In Focus

Germany’s Consumer Price Inflation dropped to a six-month low in May, as it eased to 1.4% compared with a 2% reading for April. Consumer prices fell 0.2% on a monthly basis in May while it remained flat in the previous month. This decline is being attributed to a fall in energy prices and that of vegetables (read: Merkel's Party Wins Key State Election: German ETFs in Focus).

Also, Spain’s annual inflation rate dropped to 2% in May, a five-month low, compared with a 2.6% reading for April. Consumer prices fell 0.1% on a monthly basis in May compared with an increase of 1% in the previous month.

Easing inflation was not a shock release, as a slowdown was expected. A late Easter contributed to a rise in inflation numbers in the previous month and moderation was very much expected by the markets.

These figures are well below ECB’s target inflation rate of 2% for the Euro zone. Since Germany is the largest country in the European bloc, it will reflect the most of the Euro zone inflation figures. Despite positive growth, low levels of inflation make a case for continued stimulus measures by the ECB, per President Mario Draghi.

Let us now discuss a few ETFs that are primarily focused on providing exposure to German equities (see all European Equity ETFs here).

iShares MSCI EMU ETF EZU

This ETF is a play on developed European economies using the common currency with a focus on large and mid-cap equities.

It has AUM of $13.08 billion and charges 48 basis points in fees per year. The fund has a 29.36% exposure to Germany and 10.73% to Spain (as of June 12, 2017). From a sector look, Financials, Industrials and Consumer Discretionary are the top three allocations of the fund, with 19.86%, 15.13% and 13.66% exposure, respectively (as of June 12, 2017). Total SA (PA:TOTF), Sanofi (PA:SASY) SA, and Bayer AG (DE:BAYGN) are the top three holdings of the fund, with 2.67%, 2.47% and 2.45% exposure, respectively (as of June 12, 2017). It has returned 19.77% year to date and 30.05% in the last one year (as of June 13, 2017). It has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook.

SPDR Euro STOXX 50 ETF FEZ

This fund is appropriate for investors looking to gain diversified exposure to equities of the euro zone.

It has AUM of $3.99 billion and charges 29 basis points in fees per year. The fund has a 33.27% exposure to Germany and 10.88% to Spain (as of June 12, 2017). From a sector look, Financials, Industrials and Consumer Discretionary are the top three allocations of the fund, with 22.08%, 14.40% and 11.27% exposure, respectively (as of June 12, 2017). Total SA, Siemens AG (DE:SIEGn), and Sanofi SA are the top three holdings of the fund, with 4.63%, 4.45% and 4.14% exposure, respectively (as of June 12, 2017). The fund has returned 18.55% year to date and 29.41% in the last one year (as of June 13, 2017). It has a Zacks ETF Rank #1 with a Medium risk outlook.

iShares Core MSCI Europe ETF IEUR

This fund seeks to provide exposure to Europe equities across multiple market capitalizations.

It has AUM of $2.44 billion and charges 10 basis points in fees per year. The fund has a 14.46% exposure to Germany and 5.30% to Spain (as of June 12, 2017). From a sector look, Financials, Industrials and Consumer Staples are the top three allocations of the fund, with 19.60%, 14.60% and 12.71% exposure, respectively (as of June 12, 2017). Nestle SA (SIX:NESN), Roche Holdings AG, and Novartis AG are the top three holdings of the fund, with 2.55%, 1.78% and 1.77% exposure, respectively (as of June 12, 2017). The fund has returned 17.40% year to date and 23.90% in the last one year (as of June 13, 2017). It has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook (read: What Does UK Hung Parliament Mean for Europe ETFs?).

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