Insider Monkey

12 Most Profitable European Stocks

Ramish Cheema
9 min read

In This Article:

In this piece, we will take a look at the 12 most profitable European stocks. If you want to skip our overview of the European economy and the latest trends, then take a look at the 5 Most Profitable European Stocks.

The economic impacts of the 2022 Russian invasion of Ukraine coupled with the consequences of lax monetary policies necessitated by the coronavirus lock downs have ushered in a new economic status quo in 2023. This has seen the business environment become markedly difficult, especially since the higher rates constrict business activity and make consumer borrowing and purchases difficult.

This new economic status quo has led to slow economic growth and depressed markets, with the outlook remaining unclear as we start to exit 2023. Throughout this year, investors in Europe, just like their counterparts and peers in the United States have on the Federal Reserve, have focused on the European Central Bank and the Bank of England to try to decipher when interest rates might come down. However, unlike the U.S., economic growth in Europe has been more muted, which has raised hopes that the rates might come down sooner as central banks become wary of inflicting permanent damage on the economy.

Yet, December 2023 proved to be a disappointing month for investors who were hoping for the rate cuts. Starting from the European central bank, President Christine Lagarde stressed in mid December that talk about rates going down might be a bit early since there are risks of inflation increasing again. Europe, unlike the U.S., relied on cheap Russian fuel for a large portion of its energy requirements and was forced to scuttle and look for alternatives such as liquefied petroleum gas (LPG) last year to prevent funding the Russian war effort. Consequently, prices rose much more sharply in the region than they did in the U.S., creating a much different economic landscape for the ECB than for the Fed.

Ms. Lagarde's comments were still stunning, as she shared that during their latest meeting to decide European interest, the policymakers did not consider interest rate cuts at all. The fact that European inflation as a whole stood at 2.4% in November made this omission quite striking, but perhaps a high core inflation of 3.6% helped inform their opinion. Not to mention, analysts also expect that inflation might tick higher in the future due to tax changes and other reasons.

This refusal to feed into the dovish sentiment was also present in remarks made by the Bank of England's Governor, Andrew Bailey. Mr. Bailey's country was one of the hardest hit countries by the 2022 energy crisis, with natural gas prices in the U.K. rising to unsustainable levels, creating a lot of pain for small businesses and ordinary people. The BOE has been raising interest rates for quite a while, and its December Monetary Policy Meeting saw a vote of 6-3 to keep interest rates at 5.25%. The three dissenters provided a strong hawkish tone, as all of them voted to further increase interest rates in the U.K. by 25 basis points. Governor Bailey added fuel to the fire in a post meeting press conference as he shared that he could not be certain about rates not going up in the future.

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