European equities usually surge, but why they're not rising now?

In an exclusive article published on a leading financial website's magazine, a team of financial experts offers insights into the potential of investing in European markets. This article highlights the income and growth potential, top-quality, growing European stocks at enticing valuations, and three European stocks set for sustainable profit growth.

Europe, with its diverse economy, holds a similar value appeal as the US, especially considering the US stock rotation that has seen investors turn to smaller, more value-oriented American firms. The European Central Bank's recent decision to cut interest rates ahead of the US Fed has put Europe's yield advantage into sharper relief.

The pan-European Stoxx 600 index trades on a price/earnings ratio of 15, a large discount to the US S&P 500's 25. This discount, coupled with the MSCI Europe index's 3.5% yield, compared with a yield of 1.5% in America, creates a near Europe's highest-ever dividend yield premium compared with the US.

However, the continent has faced challenges. European companies entered the latest earnings season with little room to disappoint due to overly bullish forecasts. Earnings from European companies have been less than enchanting, preventing the continent from benefiting from the sector rotation in the US. Additionally, political instability in France and Germany has made investors reluctant to invest in European stocks.

Despite these challenges, the European market offers a spread of sectors, with leading firms earning much of their revenue abroad. These firms represent a critical component of any well-diversified global investment portfolio. Notably, unlike America's Silicon Valley-focused mega-caps, Europe's leading firms are not primarily based in one location.

Jordy Hermanns of Aegon Asset Management's list of "Eurostars" includes pharmaceuticals (Denmark's Novo Nordisk), tech (Dutch firms ASML and Adyen), and green engineering (France's Schneider Electric). The most important European stocks listed as "Eurostars" by fund managers typically include leading companies like ASML (technology), LVMH (luxury goods), Siemens (industrial), Nestlé (food and beverage), and SAP (software), representing sectors such as technology, luxury, industrials, consumer goods, and software.

Three European stocks set for sustainable profit growth include French luxury giant LVMH, Dutch technology firm ASML, and German industrial giant Siemens. Despite cyclical sectors, notably luxury goods, beginning to wilt as consumers rein in spending, putting pressure on profit margins, these companies have shown resilience and potential for growth.

For instance, LVMH, the French luxury giant, is playing a prominent role in the Paris Olympics, with medal bearers wearing custom-designed Louis Vuitton outfits. This association underscores the brand's global reach and enduring appeal.

ASML, the Dutch technology firm, is a key player in the semiconductor industry, a sector crucial for the development of advanced technology. Its leading position and the growing demand for semiconductors make it an attractive investment.

Siemens, the German industrial giant, is another promising investment. Despite the challenges facing the industrial sector, Siemens' diverse portfolio and global reach position it well for sustainable growth.

In conclusion, despite the political instability and the recent earnings disappointments, the European market offers a wealth of opportunities for investors seeking income, growth, and diversification. With top-quality, growing European stocks available at enticing valuations, now might be the right time to consider investing in Europe.