Europe’s been stuck in a rut for years since the financial crisis, but could the fog of recession finally be lifting for this beleaguered continent?
Economists certainly think so — and it could be a boon for investors. CNBC’s survey of economists revealed the opinion that the region will grow by 0.2% for the second quarter, something that would mark Europe’s first economic uptick since 2011. It’s not much, but it’s a light in the darkness of this continent’s woes. For Germany, Europe’s top economy, things could be even better.
An upswing on the way?
The DAX PERFORMANCE-INDEX (INDEXDB:^DAX) swung lower this week by almost 1%, but Germany’s stock index has still posted a respectable 3.2% gain over the past month that has helped buoy a ho-hum performance from 2013’s first half. Germany’s economy has struggled to get out of its low-growth present, but the country’s Economy Ministry sounded particularly upbeat this week by claiming that the nation’s GDP likely “grew briskly” in the second quarter.
What’s the good news for investors? Germany’s economy — and lead German stocks — are reliant on trade and exports to succeed. Trade’s waxed and waned over the past few years, but after a downturn in May, exports jumped by 0.6% in June. That was less than analysts expected, but it’s still a sign of optimism for German investors looking for relief amid Europe’s ongoing slog.
European growth will only help that number continue growing, and help Germany’s top companies continue churning forward. Germany relied on Europe for 69% of its total exports last year, making the continent’s recovery a desperate need for the country’s top firms. Additionally, China made up another of Germany’s leading export partners, and positive trade data from the world’s second-leading economy released this week should also help top German exporters.
The global economy’s state of flux has weighed on firms like BASF SE (ADR) (OTCMKTS:BASFY) in the past, so an upswing will be a big relief for investors. BASF SE (ADR) (OTCMKTS:BASFY) stated that its own annual earnings target will be more difficult to reach due to slow growth in China and lower worldwide prices that have affected negatively its chemicals division. China and India, among other Asian nations, are becoming the future for BASF SE (ADR) (OTCMKTS:BASFY), as the company looks to swing away from Europe’s low-growth reality to the higher-growth possibilities of these emerging markets. Any economic boost back from Germany and the rest of the region would go a long way to making BASF SE (ADR) (OTCMKTS:BASFY)’s aims easier in the short term.
German pharmaceutical firm Bayer AG (ADR) (OTCMKTS:BAYRY) has been doing a little better recently. Pharmaceuticals aren’t as dependent on Europe as many other of Germany’s top industries are, and Bayer AG (ADR) (OTCMKTS:BAYRY)’s recently scored several victories for new drugs. This week, an FDA Advisory Committee recommended the firm’s riociguat, a drug for hypertension, and Bayer AG (ADR) (OTCMKTS:BAYRY) also welcomed strong phase 3 data from its VEGF Trap-Eye treatment diabetic macular edema. The latter’s already been approved for other indications around the world under the brand name Eylea, and for Bayer AG (ADR) (OTCMKTS:BAYRY), moving forward on more indications for the drug is great for the company’s revenue.
The article Will Germany Finally Lead Europe Out of Recession? originally appeared on Fool.com is written by Dan Carroll.
Fool contributor Dan Carroll has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.
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