Time to Buy Stocks in Germany, France and Italy?

Includes: EWG, EWI, EWQ
by: David Jackson

Excerpt from our One Page Annotated Wall Street Journal Summary (receive it by email every morning by signing up here):

More Flexibility By Europe's Labor Stokes a Recovery

  • Summary: Although labor laws have made European labor markets inflexible, companies in Germany are negotiating with workers to get greater productivity and lower labor costs. German domestic demand has been stagnant for years, and growth has come from exports, forcing companies to be globally competitive and boosting profitability. Increased global outsourcing has allowed German companies to negotiate better terms with local employees, including lower fixed bonuses, flexible work weeks, weekend shifts and lower overtime pay. As a result, the German Chambers of Industry & Commerce reports that 16% of companies will hire more staff this year, up from 10% last year, and 17% will cut staff, versus 28% last year. Unemployment dropped to 8.3% in May from 9.3% a year earlier.
  • Comment on related stocks/ETFs: Trends like this tend to be long lasting once they get going. There are two ways to play this: first, buy the iShares Germany Index Fund (NYSEARCA:EWG). Second, and more gutsy, bet that increased labor market flexibility will spread also to France and Italy, and buy the iShares France Index Fund (NYSEARCA:EWQ) and the iShares Italy Index Fund (NYSEARCA:EWI).