THE NEW YORK TIMES BUSINESS FRIDAY, JULY 31, 2020 Y B5
INTERNATIONAL | VIRUS FALLOUTScott Thiel can’t remember the
last time BlackRock Investment
Institute had a positive view on
European stocks. It’s been that
long.
At the end of June, the research
arm of the world’s largest asset
manager upgraded its view on Eu-
ropean equities to overweight,
from underweight, recommend-
ing that investors buy more of
these stocks. “It’s been a very long
time,” said Mr. Thiel, the insti-
tute’s chief fixed income strat-
egist.
Europe has a bad rep with in-
vestors. For years, asset manag-
ers and bank strategists have
characterized the region by its
anemic growth rate and shaky po-
litical union, and steered investors
away. Now, a crisis has turned into
an unlikely investment opportuni-
ty as the region appears to have
handled the pandemic better than
some other parts of the world. In
the past few months, European
assets have staged a comeback.
The euro rose to its highest level
in more than two years against the
U.S. dollar this week, and the re-
gion’s benchmark index, the
Stoxx 600, is set for a second
straight month of gains greater
than those of the S&P 500 index, in
dollar terms, according to data
from FactSet.
The most important reason for
this upswing, analysts say, is that
Europe is recording far fewer new
cases of coronavirus. There are
still occasional spikes in Europe,
and some early signs that the in-
fection rate is starting to level off
in the United States. But there are
about 65,000 new cases each day
in the United States, compared
with fewer than 10,000 new cases
across the Atlantic.
The next reason is politics.
When European leaders reached
an agreement last week on a 750
billion euro ($888 billion) recov-
ery fund, it wasn’t the size of the
deal that impressed investors, but
the fact that it happened after four
long nights of negotiations. The
decision to raise money col-
lectively and give grants to the
countries hit hardest by the pan-
demic was a message that there is
some political will left to further
the project that created the euro
two decades ago. European unity
could still be found in an emer-
gency, despite fraying on the
edges caused by the exit of Britain
from the European Union, budget
fights with Italy, and concerns
about the dismantling of democra-
cy in Hungary.
“The E.U. recovery fund is a gi-
gantic step forward for Europe,”
Mr. Thiel said. “The E.U. has al-
ways been an organization that
has reacted in times of crises.
That’s how they move forward.”
This week, the euro climbed to
more than $1.18, the highest since
June 2018, as demand for the cur-
rency and other assets increased
amid expectations that normal
economic activity would resume
more quickly in the region.
The euro has gained more than
5 percent against the dollar this
year, according to FactSet data.
One way to predict whether this
trend will continue is to look at thepositions taken by speculative
traders rather than longer-term
investors, like hedge funds.
At the moment, there are far
more bets that the euro will rise
than bets that the currency will
depreciate. This net long position,
as it is called, is the largest it has
been in more than two years, ac-
cording to data from the Commod-
ity Futures Trading Commission.
As recently as March, traders’
bets that the euro would decline
outnumbered those expecting an
appreciation.
The recovery fund and expecta-
tions of closer fiscal integration
should be “a long-term positive”
for the euro, Valentin Marinov, a
currency strategist at Crédit Agri-
cole, said.
Money from overseas is flowing
into exchange-traded funds that
buy European stocks, and there
are signs that European investors
are returning to their home mar-
kets and selling dollar-denominat-
ed assets, which is strengthening
the euro, Mr. Marinov added.
It’s a welcome change for Mar-
cus Morris-Eyton, an asset man-
ager at Allianz Global Investors.“Frustratingly for us, Europe has
underperformed for quite a num-
ber of years now,” he said. Invest-
ors have generally shied away
from European stocks, while buy-
ing U.S. shares. “That has shown
tentative signs of reversing in the
last couple of months,” Mr. Morris-
Eyton said.
Since late May, Europe’s stock
market has recorded stronger
gains than the S&P 500 index, af-
ter taking the strength of the euro
into account.
But over a longer time period,
European markets still have a lot
of catching up to do. Year to date,
the S&P 500 is slightly positive,
whereas the Stoxx 600 is down
13.5 percent when calculated in
euros, and more than 7 percent in
U.S. dollars.
While investors are starting to
take advantage of the relative
cheapness of European equities, a
sustained recovery in either stock
market will depend on consumer
and business confidence return-
ing, which would in turn stir eco-
nomic activity. After record-
breaking slumps in American and
German G.D.P. in the second
quarter, economists are watching
more recent indicators to see how
quickly a recovery might take
hold. Even though consumer con-
fidence fell again in July, after re-
bounding the previous month, in
both the euro area and the United
States, early signs still favor Eu-
rope, several analysts said.
“The U.S., and a number of
Asian investors, have turned their
eyes toward Europe,” said Sheila
Patel, chairman of Goldman
Sachs Asset Management. Eu-
rope has “been able to deal with
the early stages of the crisis and
now seems to be containing out-
breaks more readily.”
That said, new coronavirus out-
breaks are still emerging and rais-
ing anxiety about a second pan-
demic wave in Europe. The num-
ber of new cases in Spain led the
British government last weekend
to suddenly put the country and
its surrounding islands back on a
quarantine list. And Germany re-
corded more than 3,000 new cases
in the past week.
This has the potential to undo
Europe’s nascent gains. “Public
health isn’t just about throwing
money at a problem,” Ms. Patel
said.Bright Outlook for European Stocks
By ESHE NELSONOutperforming the
S&P 500 index since
late May.
Matt Phillips contributed reporting.
How many U.S. dollars one Euro buys
Source: FactSet THE NEW YORK TIMES$1.251.201.151.101.051.00$1.182019 2020Bets by traders on gains in the euro-dollar
exchange rate, in net contractsSources: Commodity Futures Trading Commission, Investing.com THE NEW YORK TIMES2018 2019 2020+150,000+100,000+ 50,0000- 50,000
–100,000Changes in stock indexes since April 30
Source: FactsetNote: In U.S. dollarsTHE NEW YORK TIMES+20%+100–10Stoxx 600S&P 500May June JulyCONSUMER GOODS
Gains for Procter & Gamble
Procter & Gamble reported
strong demand for products like
dishwashing detergent, disin-
fectants and cough suppres-
sants, causing revenue to rise 4
percent to $17.7 billion in its
fourth quarter, while net income
rose to $2.8 billion from a loss of
$5.2 billion a year earlier.
Sales increased throughout
the company — which produces
Charmin toilet paper, Pampers
diapers, Tide detergent and
Vick’s cough medicine — with
the exception of its grooming di-
vision. A “pandemic-related re-
duction in shaving frequency,”
caused Gillette sales to drop, ac-
cording to the company, whose
earnings call included discus-
sion of the rising popularity of
mullets and “coronabeards.”
Procter & Gamble increased
spending on marketing 2.7 per-
cent in its fourth quarter, which
ended June 30. TIFFANY HSUENTERTAINMENT
10 Million Subscribers
For Comcast’s Peacock
Comcast reported on Thurs-
day $23.7 billion in revenue and
$7.9 billion in adjusted profit for
the second quarter, beating ex-
pectations.
Peacock, its new streaming
product, attracted 10 million
sign-ups in its first three
months. It differs from other
platforms like HBO Max (which
netted 4.1 million in one month)
and Netflix in that it is free and
relies on advertising for reve-
nue. (There is a paid tier that
features more content but still
includes ads.) The strategy is
reminiscent of the original
broadcast system, which is also
free. Comcast hopes to have 35
million users by 2024.
With most of the country un-
der lockdown, Comcast added
323,000 more broadband
customers, but it lost 477,000
pay TV subscribers. People
switched to cheaper streaming
alternatives as wallets tight-
ened under the pandemic. It’s
not a bad trade for Comcast,
since a broadband subscriber
tends to add more profit than a
video one. EDMUND LEEVirus Briefing
Whataview.
We’vedesignedtwodistinctmobileappssoyoucanusetheonethatfitsyourinvestingstyle.TDAmeritradeMobileletsyoukeeptrack
of your portfolio at a glance, while thinkorswim® Mobile gives you the tools you need to conduct in-depth analyses right from your phone.
Visit tdameritrade.com/apps to learn more.
TD Ameritrade, Inc., member FINRA/SIPC. © 2019 TD Ameritrade.BD