Euro Stoxx 50 Index: Share Price, Chart and Forecast
The Euro Stoxx 50 stock index is one of the most widely followed indices globally and is a measure of the health of the European economy, as it includes 50 of the largest companies in the region. As a result, it is also a wise investment for many traders, especially those who value diversification.
In this article, we will explain in detail what the Euro Stoxx 50 is, its history, how it works and its future prospects. Finally, we will also introduce you to a broker where you can trade the Euro Stoxx 50 quickly and easily.
What is the Euro Stoxx 50 Index?
Find below all the information you need to fully understand the benefits and potential of the Euro Stoxx 50 index.
Euro Stoxx 50 Definition
The Eurostoxx 50 is the benchmark index for the Eurozone markets. Some traders call it simply EU50. Similar to the CAC 40 for France, the Euro Stoxx 50 index groups 50 companies according to their market capitalization within the Eurozone. Note that is is sometimes written as “EU stocks 50”.
The Euro Stoxx 50 index is a market-weighted index of the 50 largest companies in the 11 countries of the Eurozone (Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal, and Spain). Companies are selected from 19 supersectors in terms of free-float market capitalization. The index is part of the STOXX Limited family of flagship indices. The 50 companies in the index represent approximately 60% of the floating market capitalization of the EURO STOXX Total Market Index (TMI).
How is the Euro Stoxx 50 Calculated?
The Euro Stoxx 50 is weighted proportionally by the market capitalization of each of its 50 constituent companies. It only considers the free float to obtain the weighting of each stock, i.e. the percentage of shares listed on the stock exchange. Furthermore, to avoid excessive concentration risks, the weighting of the largest components is limited to 10%.
The Euro Stoxx 50 can be calculated with or without dividends reinvested. It is updated every year in September. The selection is based on a process that favors the most stable references.
Euro Stoxx 50 Index Today and History
The Euro Stoxx 50 was created in 1999 by the U.S. company Dow Jones, to allow Anglo-Saxon investors to make investments based on the overall economic health of all European countries rather than just one country. It was from the start based on the 50 most representative European companies in the Eurozone. The Euro Stoxx 50, therefore, measures the average performance of these most prominent companies, which are selected from 18 different economic sectors.
The Euro Stoxx 50 was initially composed of a majority of French companies (14), closely followed by the Germans (11), then the Netherlands (10), Italy, Spain, Belgium, Ireland, Finland, and Portugal.
About the performance, calculated annually, the key figures for the index are as follows:
- Average annual return (without dividends): 4.3% per year
- Average annual return (dividends reinvested): 6.5% per year
This marked difference between the two versions of the index is easily explained. The 50 stocks in the Euro Stoxx 50 are Europe’s largest companies and are generally well-established, long-time market leaders that pay out a large proportion of their profits in dividends.
The Euro Stoxx 50 Price Evolution
This section will be dedicated to the study of the Euro Stoxx 50 historical data since its creation, identifying the main trends during its history
Euro Stoxx 50 Chart
Let’s start by discovering below the monthly Euro Stoxx 50 chart on which we will base our observations:
After a soft progression from its creation until the middle of the ’90s, when it was evolving around 1400 points, the Euro Stoxx 50 index showed a lightning progression which allowed it to reach an absolute record at 5332 points in April 2000, a rise of more than 280% in approximately 5 years. It should be noted that this historic peak has never been equaled since.
The internet bubble bursting in 2000 then plunged the Euro Stoxx 50 into a deep correction, which brought the index to a low of 1850 points in March 2003, after a fall of 188% in 3 years.
It then posted a sharp rebound of several years, peaking at 4572 points in June 2007, after having almost tripled in value in just over 4 years. But the global financial crisis of 2008 and the debt crisis in Europe caused the Euro Stoxx 50 to plunge again to a low of 1,765 points in March 2009, a drop of 61% in 2 years.
Since then, the Euro Stoxx 50 index has been on an upward trend. The covid-19 pandemic did cause a drop in the index in 2020, but it made up for its losses and much more quickly.
Finally, it should be noted that it is possible to trace on the monthly Euro Stoxx 50 chart an uptrend line that has been valid since the creation of the index, and that has notably stopped the fall displayed in the face of the pandemic.
What Influences the Price of Euro Stoxx 50 index?
As we have seen when studying the historical evolution of the Euro Stoxx 50, the index can be influenced by various factors. Below are some key factors that can affect the price of the Euro Stoxx 50.
- The economic health of Europe is of course, a major influence on the index price. In particular, the statistics concerning the Eurozone, or the most important European countries such as France and Germany, will have a significant influence.
- Some stocks have more weight than others in the Euro Stoxx 50 index. Therefore, the news and quarterly results of the most important stocks in the index can directly influence its price.
- Monetary policy, in this case from the ECB, can also have a crucial impact. Indeed, rate hikes increase borrowing costs for companies, while rate cuts facilitate their development.
- A significant proportion of the Euro Stoxx companies’ turnover is generated internationally. As a result, major European trade agreements with China or the United States, for example, may also impact the index.
The EuroStoxx 50 Companies and Components
Despite the lack of a diversification policy for the index, Euro Stoxx 50 composition benefits from a reasonable sector allocation. French luxury brands nevertheless lead cyclical stocks with 18.3%, followed by information technology with 15.8%. Industry and finance come next with 14.1% and 13.8% respectively.
The Top 3 Euro Stoxx 50 components are as follows:
- The Dutch company ASML represents 7.76%.
- The French group LVMH is in second place with a weighting of 5.82%.
- The German group Linde ranks third at 4.32%.
And here are the first countries with their weight in the index:
- France: 39%
- Germany: 33%
- The Netherlands: 11%
- Spain: 9%
- Italy: 5%
- Belgium: 2%
- Others: 1%
How Are the Euro Stoxx 50 Companies Chosen?
The methodology to select the Euro Stoxx 50 companies is the following:
- Every year, in August, Quontigo ranks the floating market capitalizations in descending order
- The 40 largest that were not in the index are included
- The components that were in the index and are not in the top 40 are added
- If there are still components missing, the top-ranked components are added.
The objective of this method is to avoid frequent changes of components.
Euro Stoxx 50 Companies List
Find below the list of the 20 most important stocks of the Euro Stoxx 50 components:
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Should I Trade the EuroStoxx 50? Points to Consider
The Euro Stoxx 50 is a popular stock index with many investors and has some key advantages.
- As far as volatility is concerned, traders like the Euro Stoxx 50 to be volatile enough to make big gains in day-trading, and reasonable enough to avoid big surprises.
- Not only does the Euro Stoxx 50 host stocks from various sectors, but it also hosts stocks from various countries. This gives it a diversification advantage over other stock indices.
- Most brokers, including ZFX, allow you to trade the Euro Stoxx 50 with a comfortable amount of leverage to make big money on short-term movements in the index.
- If you trade the Euro Stoxx 50 via CFDs, as ZFX does, you will have the ability to short the index, i.e. profit financially from its declines, as easily as from its rises.
How Can I Trade the Euro Stoxx 50 Index (EURO50)?
The first to do is choose a trustworthy and efficient broker which will provide the tools you need to trade in the best conditions. One broker fulfilling these criteria is ZFX. ZFX is a highly regulated broker, which provides the MT4 trading platform, a large portfolio of assets and competitive fees. Let’s see how to invest in EURO50 through its platform.
How to Trade the Euro Stoxx 50 Index Easily
Buying Euro Stoxx 50 index through the broker ZFX is very simple and fast. Indeed, the account opening is done entirely online, and takes only a few minutes. Let’s go through each step in detail.
1 – Register with ZFX
For this first step, go to ZFX broker’s website, and select “Open an account”. You will then have to fill in a registration form with several personal details, including your phone number, which will be verified by SMS.
After filling out the form, click on “Next” at the bottom of the page. Immediately after this step, ZFX will display your MT4 login and password, and invite you to download the platform.
2 – Make your First Deposit
For this step, select “Make a deposit” on the screen that is displayed immediately after registration. You will then be asked to choose a payment method. Let’s take Mastercard as an example:
On this screen you will be asked to indicate the deposit amount. Then, click on “Confirm Deposit”. You will then be asked for your credit card information before the final validation of the payment.
3 – Account Verification
Finally, it will also be necessary to proceed with the account verification by sending supporting documents.
As shown in the image above, you will need to upload the documents directly to the ZFX website.
4 – Buy Euro Stoxx 50 Index
Once your documents are validated, you will then be ready to buy Euro Stoxx 50 index. Simply log into the MT4 platform and follow the on-screen instructions. Then, select the EURO50 asset and invest as you wish.
Things to Know Before Investing in the Euro Stoxx 50 index
Here are some valuable tips and tricks to help you succeed in trading the Euro Stoxx 50
- The index trades from 9 am to 5:30 pm, Monday to Friday
- Euro Stoxx 50 futures and some Euro Stoxx 50 ETF (for example the iShares Euro Stoxx 50 UCITS ETF) however allow trading outside of official trading hours.
- The most popular method for investors to trade the Euro Stoxx 50 is through CFDs, which allow for leverage and short selling.
- If you want to trade the Euro Stoxx 50 share price in the short term, it will be essential to learn technical analysis and charting.
- Traders of the Euro Stoxx 50 should follow the economic calendar each day to see which statistics will influence the index that date.
- You can practice trading Euro Stoxx 50 for free and without risk with a demo account, for example, via ZFX.
- It is essential to follow the news of the most important companies in the Euro Stoxx 50 index, especially the quarterly results, which can have a strong immediate impact.
EU50 Index Future, Forecast, and Predictions
Let’s now focus on the forecasts for the Euro Stoxx 50 to see if the odds are in favor of the index rising or falling over the next few months.
Analyst Recommendations and Forecasts
To assess analysts’ views for the Euro Stoxx 50 index, we need to look at their views for the stocks that carry the most weight in the index, namely ASML Holding, LVMH, and Linde.
- Regarding ASML, 24 analysts recommend buying, 6 holding, and 6 selling. Moreover, their average target implies a potential upside of more than 20% from the current price.
- For LVMH, 23 out of 29 analysts recommend buying. 2 recommend Hold, and 5 recommend Sell. The average target posted by these analysts also suggests that the share should rise by 18% over the next 12 months.
- Finally, for Linde, the consensus is also strongly Buy, with 17 analysts saying Buy, 4 recommending Hold, and none recommending Sell. The average target of these analysts implies an 18% rise in the share price.
In summary, analysts have a strongly bullish view and aggressive targets for the major stocks in the Euro Stoxx 50, arguing for an upside in this index.
Analysis of Euro Stoxx 50 from Fundamental and Technical Perspectives
The economic recovery from the end of the covid-19 is still in its infancy. Many parts of the economy are still very much in difficulty. This means we can expect sustained growth in the coming months and years. This growth should benefit most of the world’s stock market indices, including the Euro Stoxx 50, which in its case is the best bet on the post-pandemic economic recovery in Europe.
EU50 Technical Forecast
As we will see, the Euro Stoxx 50 chart analysis also suggests that the index will rise in the medium term. The weekly Euro Stoxx 50 chart shows that the index has been in a clear uptrend since the middle of March 2020, when it bottomed at 2300 points. The Euro Stoxx 50 peaked at 4250 points in September 2021, up 85% in 1.5 years.
During this period, the Euro Stoxx 50 also broke through long-term resistance at 2850 points, which was a bullish signal, as was the return above the 4000 points thresholds. Thus, the medium-term profile of the Euro Stoxx 50 will remain positive as long as the index retains support at 3850 points.
Bottom Line: Is Euro Stoxx 50 a Good Investment Now?
The Euro Stoxx 50 is a stock market index with several advantages, especially in terms of diversification. By including stocks from various European countries, it has a geographic diversification advantage over other indexes, which will appeal to long-term investors.
In the short term, the Euro Stoxx 50 is also a perfectly suitable index for day-trading, especially if invested via CFDs. Moreover, both fundamental and technical forecasts suggest that the Euro Stoxx 50 will rise in the coming months, as all indicators are green.
To take advantage of the Euro Stoxx 50 index now, simply sign up to the broker ZFX today. In addition to offering the highly efficient and popular MT4 platform, this broker offers competitive fees and a solid regulatory framework.