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European stocks look attractive after ECB's latest stimulus boost, traders say

Traders flag European stocks to watch as central bank leaders boost stimulus measures
Traders flag European stocks to watch as central bank boosts stimulus measures

Eyeing European equities?

That might just be warranted following the European Central Bank's 600 billion euro boost to its emergency stimulus package for the coronavirus pandemic, two traders said.

The ECB's move Thursday brought its total for its purchasing program to 1.35 trillion euros, or roughly $1.5 trillion.

"They're clearly sending a signal to the market," Gina Sanchez, founder and CEO of Chantico Global, told CNBC's "Trading Nation." "[ECB President Christine] Lagarde is standing ready to put some support under the market and they have managed to lower yields."

The central bank's actions have "definitely continued to support the rally that's been happening" in overseas equities, Sanchez said.

"Quite frankly, the fundamentals were already setting up to support that rally, so this is further support," she said. "They were ahead of the U.S. going into this, they have been ahead of the U.S. in testing, and so they should theoretically be ahead of the U.S. coming out of it. And we've finally seen [estimates] stop getting revised lower and start to stabilize. So the outlook for European equities generally is quite good."

Matt Maley, chief market strategist at Miller Tabak, pointed out that the recent outperformance in European stocks comes after several years of lagging their U.S. counterparts.

"The one thing to really look at is the DAX," the German stock index, he said in the same "Trading Nation" interview.

"Everybody's talking about the big breakout in the S&P above its 200-day moving average. Well, the DAX has made a similar move to the upside," Maley said.

Beyond that, European banks — which have long trailed their broader domestic market — have been "forming a nice base" in recent months, the strategist said.

"After getting decimated earlier this year, they've traded in a sideways range," Maley said. "Now, it's breaking out of that sideways range and breaking out of that base. So if it can see more upside follow-through, it's going to be very bullish."

While stocks in both of the above indexes are "getting a little overbought on a near-term basis," few U.S. investors are taking advantage of the gains, Maley said.

"Remember, these stocks are under-owned compared to the U.S., and if they continue to outperform, … even though money will be going into both markets, there'll be more money that will start to go into the European markets and be a big surprise," he said.

The DAX was up more than 1% in Friday afternoon trading, while the Stoxx 600 Bank Index was up about 1%.