Are these the best European stocks to watch?

How is the European stock market performing?

European stocks had a bad 2020, in line with the rest of the global equity markets. But in 2021, the economic recovery began. Thanks to a rapid vaccine roll-out programme, European stocks and ETFs have been leading this recovery, with some stocks reaching record highs during the summer months.

But even without this post-pandemic boost, Europe shares are worthy of some attention. UK investors can find growth opportunities and diversification abroad, either by investing directly into well-known European companies such as Diageo, or by using an exchange traded fund (ETF) to spread money across a variety of firms.

Read on to find out how to trade or invest in European shares and ETFs, and what shares and funds are worth considering. Please note, our top European stocks are picked not necessarily the best by size or any other singular factor, but are picked based on market capitalisation, dividend pay-outs, and more.

How to trade or invest in European shares and ETFs

With us, you can trade or invest in European shares or ETFs using spread bets or CFDs. When trading, you can speculate on both rising and falling market prices. Alternatively, you can invest in European companies or funds outright using our share dealing service. Follow these steps to get started:

1. Choose whether you want to trade or invest
2. Create an account or log in to your account
3. Identify your opportunity
4. Carry out your own analysis and research
5. Open and monitor your position

Take note that when trading with us, you’ll use leverage to open a position. While this lowers the cost of entry by means of margin, it magnifies both profits and losses. When investing, however, you’ll need to commit the full value of the position upfront and you can never lose more than the initial outlay. Always be sure to take the appropriate risk management steps.

Top four European stocks to watch

These are our top stock picks based on popular companies to watch:

1. ASML Holdings
2. Diageo
3. SAP
4. IAG

ASML Holdings

This Dutch semiconductor company has been one of the big winners of the year so far – with its stock price growing by more than 67% between January and August 2021. This is largely due to the global chip shortage, which has seen some of the world’s leading technology companies turn to ASML to keep up with demand.

Chips are used in everything from smartphones and cars, to industrial equipment, so demand is expected to remain high. ASML has proven its ability to scale up quickly when needed. However, there is plenty of global competition in this sector, and as supply chains stabilise, ASML’s value could stutter.

Trade ASML Holdings

Diageo

Despite taking a hit during the 2020 to 2021 lockdowns, Diageo remains the leading performer in the European beverage industry. By the end of quarter one (Q1) of 2021, its stock price had recovered to pre-Covid-19 levels, and stock values reached an all-time high during the summer of 2021, as pubs and restaurants opened up again.

Even before the pandemic, Diageo was one of the most popular European stocks. The growing demand for premium spirits is expected to keep Diageo in the spotlight for the foreseeable future.

Trade Diageo

SAP

SAP was one of the few winners of the Covid-19 pandemic. The Germany-based software company saw its stock price reach new heights in August 2020, as billions of people were forced to work remotely.

However, the company’s Q3 2020 earnings reported that the company’s results were down across the board, an issue that SAP blamed on the pandemic slowing down sales and large projects. This sent SAP’s share price falling, but the company’s newfound commitment to cloud computing has helped to steer it back on track.

Trade SAP

IAG

Like all airline companies, IAG had a bad 2020. But the Anglo-Spanish company – which owns British Airways – is ready for its comeback. Thanks to the rapid vaccine rollout across the continent, flights between the UK and Europe are taking off again, and IAG is ramping up its capacity once more.

IAG’s considerable cash holdings have helped the company to survive the economic downturn, and analysts have predicted that the airline group will make a swift recovery as travel restrictions continue to ease.

Trade IAG

Top three European ETFs to watch

1. WisdomTree Europe SmallCap Dividend Fund
2. Vanguard FTSE Europe ETF
3. SPDR Euro Stoxx 50 ETF

Again, these ETFs are not necessarily the best by virtue of largest size, but instead are our picks based on the most popular ETFs traders are watching right now.

WisdomTree Europe SmallCap Dividend Fund

The WisdomTree Europe SmallCap Dividend Fund is one of just a handful of ETFs which offers access to the smaller companies of Europe – specifically those small companies which pay dividends. It has holdings in 160 small firms across the UK, Norway, Sweden, Switzerland, Italy, and other European countries. Its remit is to access local economic growth, which makes it a great option for investors and traders who believe that small businesses are the backbone of a healthy economy.

Trade the WisdomTree Europe SmallCap Dividend Fund

Vanguard FTSE Europe ETF

With more than 1300 holdings, this is one of the best European ETFs in terms of sheer size and diversity. The Vanguard FTSE Europe ETF has approximately $25.7 billion in assets under management, with an average trading volume of more than four million shares per day.

It seeks to track the performance of the FTSE Developed Europe All Cap Index, and so its top holdings include some of the best-known brands in Europe, including Nestle, AstraZeneca, and LVMH Moet Hennessy Louis Vuitton.

Trade the Vanguard FTSE Europe ETF

SPDR Euro Stoxx 50 ETF

The SPDR Euro Stoxx 50 ETF is a relatively small fund, but it is laser focused on just 50 of the largest representative stocks in the Eurozone, making it a great option for investors who want exposure to the top-performing companies.

Its portfolio allocations are rebalanced every quarter to reflect changes in the market. However, it is worth noting that due to its tight 50-stocks remit, just one big company movement has the power to drag the entire ETF – conversely, an individual stock jump can benefit all fundholders.

​Trade the SPDR Euro Stoxx 50 ETF

Why do people trade and invest in European stocks and ETFs?

• European stocks and ETFs can help diversify UK investor portfolios
• The Covid-19 vaccine rollout has helped the European economy to recover quickly from the economic downturn of 2020
• This recovery has created new growth prospects for European investors, in both local economics and on an international scale

Best EU shares and ETFs summed up

• This is an exciting time to invest in European stocks and shares and European ETFs
• The European stock markets are on an upswing, and UK investors can access these opportunities by investing in European stocks and ETFs
• It is easy to invest and trade in EU stocks and ETFs
• Open an account to start trading or investing in EU shares and ETFs