Investing in Europe: An introduction
Europe incorporates global industrial powerhouses such as Germany, the luxury brands of France and Italy, the banking skill of Switzerland, alongside the fast-growing emerging economies of Eastern Europe.
Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.
Why is now the right time to invest in Europe?
Europe has been a natural home for investors keen to diversify away from US markets, as fears have emerged over the weakness of the Dollar, the policy agenda and high valuations.6 Investors are also hopeful that government spending plans could support stronger economic growth across the region.7
The diversification trade – After almost a decade when Europe has been overlooked as investors have focused on the US technology sector, global investors are starting to diversify. Europe has benefited.8
Government spending – Spending plans for energy infrastructure, defence, and improved utilities, particularly in Germany, could help galvanise the region’s growth and create new opportunities.7
Valuations – Europe has a wide choice of attractive and well-run companies, yet valuations in the region continue to lag those of the US.4
Key drivers and risks of investing in Europe
Interest rates
Lower borrowing costs can help companies deliver stronger earnings and cash flow. As a result, falling interest rates may push share prices higher, while rising interest rates can have a negative impact. This is particularly important for smaller companies, where sentiment is more sensitive to interest rates.
Euro versus Dollar
Europe is home to a range of large multi-national companies. A weaker currency can make European exports more competitive and may also improve earnings and dividend payouts through a translation effect.
European government spending
Increased spending by the European Union and individual governments across the region can help galvanise economic growth. It can also provide significant support to key sectors, such as energy infrastructure, utilities, defence or housebuilding.
Strength of the global economy
The strength of the US and Chinese economies is particularly important for European exporters. Chinese consumers, for example, have historically been significant buyers of European luxury goods.9 When these two economies are strong, it can provide a significant boost to European companies.
Geopolitical uncertainty
Investors prefer a stable geopolitical backdrop. European markets may be influenced by global tensions. More recently, the war in Ukraine has proved disruptive in areas such as agricultural prices and energy costs, and continues to influence parts of the European market.10
Major market Indices
Europe has a range of benchmark indices. These include pan-European indices and indices for individual countries, plus large and small cap indices. Most are market capitalisation-weighted, though there are also options such as the S&P Europe 350 Equal Weight Index, or the MSCI Europe Equal Weighted Index.
Eurostoxx 50 – The Eurostoxx 50 tracks the performance of the 50 largest stocks in Europe. Its largest sectors are technology, consumer goods and industrial companies with France and Germany approximately two-thirds of the total. The largest holding (ASML, a key machinery supplier to the semiconductor industry) is 8% of the index.11
FTSE World Europe ex UK – The index tracks 564 large and medium sized companies across Europe. Its largest weightings are in banks, industrial goods and healthcare. The largest holding (ASML) is 3.8% of the index.12
CAC 40 – The CAC 40 tracks the 40 largest and most actively traded shares listed on Euronext Paris and is the main proxy for the French stock market. Its largest weighting is in the consumer sector, with financials and electronic technology also well-represented. Its largest holding is digital transformation group Schneider Electric at 7.8%.13
Dax – The DAX index is the main index for the German market, tracking the 40 largest companies on the Frankfurt stock exchange. It is dominated by industrial goods, technology and insurance companies. Software group SAP is the largest weighting, at 13.9% of the index.14
When is the right time to invest in the European stock market?
When economic growth is strong
Although the region’s international companies will draw some of their revenues from outside Europe, stronger economic growth helps support a strong corporate sector, higher consumer spending and better public finances. It may also help sentiment towards European companies among global investors.
When government policy is supportive
European stock markets may do well when governments are spending more to improve growth. This can be in areas such as infrastructure spending or industrial subsidies. This can help boost economic growth and the prospects for individual companies across the region.
When interest rates are lower
Lower relative interest rates can boost consumer and corporate spending, leading to stronger economic growth. It also makes it easier for companies to invest to grow their businesses. Markets may strengthen in anticipation of future rate cuts, both from the European Central Bank and US Federal Reserve.
When global growth is improving
Europe is an export powerhouse. Strong global demand, particularly from China and the US, can help support the region’s economy and corporate sector. European markets may do well when global economic activity is expanding and market confidence is high.
When the Euro is weaker
A weaker currency also helps exports, making them more competitive abroad and boosting the profits of multinational firms. It may help the translation effect for international earnings, and may help boost dividends from European companies.
When geopolitics are benign
Geopolitical tension has created significant problems for Europe. The war in Ukraine has raised energy prices and forced significant defence spending.15 US tariffs have also weighed on European companies.16 Reducing uncertainty could help put European companies in a stronger position.
Investment opportunities in Europe
Financials – The financial sector is a major area of strength across Europe. Among the large caps there are globally competitive banks such as Banco Santander, BNP Paribas and Crédit Agricole Group. The region also has large insurance groups such as Allianz.17 Financials are also well-represented among Europe’s smaller companies through banking groups such as BAWAG and Banca Monte Paschi.
Technology – Semiconductor equipment group ASML is the largest company in Europe, at almost 4% of the MSCI Europe ex UK index.18 German software group SAP is the second largest index constituent and the largest company in the German market, while Dutch investment group Prosus is one of the most important technology investors in the world. Technology companies are only lightly represented among the small caps, at around 8% of the MSCI Europe ex UK Small Cap index.19
Healthcare – Novo Nordisk, pioneer of the life-changing weight therapies, is based in Denmark, but the region also has companies such as Novartis and Roche, which are at the forefront of drug development and distribution globally. Healthcare forms a smaller part of the smaller companies index.
Luxury goods – The world’s most desirable brands are often listed in Europe. LVMH, which owns Louis Vuitton, Christian Dior, Celine and Fendi, is one the region’s most valuable companies. It sits alongside Hermes, L’Oreal and EssilorLuxottica. European markets also hold specialist luxury brand names such as Ferrari and Moncler.20
Industrials – Germany has a well-established reputation for creating some of the world’s most recognisable industrial names, including Siemens and Rheinmetall. France has Airbus and Schneider Electric, while multinational industrial equipment group Atlas Copco is listed in Sweden. In the smaller companies sector, there are specialist industrial groups such as photonics group SPIE and digital technologies group Accelleron.19
European market performance
Eurostoxx
European stock markets have struggled in the shadow of the dominant US technology sector. The region has rallied in 2025 in the wake of new stimulus plans from Germany and renewed commitments for spending on defence.21 There have been challenges for some of Europe’s key sectors, such as autos and luxury goods, in the wake of higher competition and a weaker Chinese economy.22 However, this is starting to turn around. In contrast, areas such as banks and other financials have been very strong.
MSCI Europe ex UK Small Cap Index
Europe’s smaller companies have lagged larger stocks, with investors still nervous about the weakness of domestic European economies.23 They suffered significant weakness during the Covid pandemic and the sharp rise in interest rates in 2022. However, lower interest rates have helped revive the sector, which has performed better in 2025.
Annual performance to last quarter end (%) (GBP)
|
30/09/2024 |
30/09/2023 |
30/09/2022 |
30/09/2021 |
30/09/2020 |
|
|
Price |
21.44 |
5.36 |
17.68 |
8.69 |
36.88 |
|
NAV |
14.67 |
5.97 |
14.35 |
7.67 |
46.68 |
|
Sector Price+ |
32.79 |
6.75 |
6.91 |
-7.38 |
33.51 |
|
Sector NAV+ |
21.10 |
13.58 |
1.33 |
-8.13 |
29.07 |
|
Reference Index‡ |
10.22 |
5.29 |
-3.95 |
11.98 |
22.05 |
† Morningstar IT Global Emerging Markets
‡ MSCI Frontier + Emerging Markets ex Selected Countries Index
The figures shown relate to past performance. Past performance is not a reliable indicator of current or future results and should not be the sole factor of consideration when selecting a product or strategy.
Index performance returns do not reflect any management fees, transaction costs or expenses. Indices are unmanaged and one cannot invest directly in an index.
Our investment trusts
BlackRock has been managing investment trusts for over 30 years and now holds over £4.283bn in AUM24 across its range.25 All its trusts are supported by the group’s global analyst team and led by our experienced portfolio managers.
BlackRock Greater Europe Trust
Targeting capital growth, the BlackRock Greater Europe Trust (BRGE) invests across small and large companies in the region. The Trust’s experienced management team focuses on identifying high quality companies that can be held for the long term.
Regional Hub FAQs: Europe
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Europe’s breadth of cultures, skills and industries are reflected in the region’s diverse and dynamic stock markets. There are options for all types of investors, from blue-chip multinationals to fast-growing smaller companies. The region incorporates global industrial powerhouses such as Germany, the luxury brands of France and Italy, the banking skill of Switzerland, alongside the fast-growing emerging economies of Eastern Europe.
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Europe is home to globally competitive companies, with strong brands, industrial expertise and skilled management teams. European companies also provide choice for income investors, with a range of companies paying high and sustainable dividends. European companies operate under a tight governance regime, which provides reassurance for investors that they are operating in a sound regulatory environment.
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The BlackRock Greater Europe Trust (BRGE) invests in small and large companies across the region, including emerging European countries. The Trust’s experienced management team, led by Stefan Gries, focuses on identifying high quality companies that can be held for the long term.
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European stock markets have significant breadth, but certain sectors are well-represented. The financial sector is a major area of strength, with globally competitive banks, asset managers and insurers. Healthcare is another major sector, notably Danish group Novo Nordisk, one of the largest companies in the region. Technology is represented through companies such as semiconductor equipment group ASML and German software group SAP, while luxury goods are another key part of the European market, with groups such as LVMH, Hermes and EssilorLuxottica.
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Geopolitical tension has created significant problems for Europe, with the conflict in Ukraine raising energy costs and disrupting trade flows. As an export powerhouse, Europe is also sensitive to global economic conditions, particularly in China and the US. US tariffs may also be a source of vulnerability for European companies.
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The yield on the MSCI Europe is higher than that of the MSCI World.18 There is plenty of choice for investors seeking income in Europe, with a range of dividend-paying companies.
Annual performance to last quarter end (%) (GBP)
|
30/09/2024 |
30/09/2023 |
30/09/2022 |
30/09/2021 |
30/09/2020 |
|
|
Price |
21.44 |
5.36 |
17.68 |
8.69 |
36.88 |
|
NAV |
14.67 |
5.97 |
14.35 |
7.67 |
46.68 |
|
Sector Price+ |
32.79 |
6.75 |
6.91 |
-7.38 |
33.51 |
|
Sector NAV+ |
21.10 |
13.58 |
1.33 |
-8.13 |
29.07 |
|
Reference Index‡ |
10.22 |
5.29 |
-3.95 |
11.98 |
22.05 |
† Morningstar IT Global Emerging Markets
‡ MSCI Frontier + Emerging Markets ex Selected Countries Index
The figures shown relate to past performance. Past performance is not a reliable indicator of current or future results and should not be the sole factor of consideration when selecting a product or strategy.
Index performance returns do not reflect any management fees, transaction costs or expenses. Indices are unmanaged and one cannot invest directly in an index.
Our range
Source:
1 Eurostat - EU population increases for the 4th consecutive year - 11 July 2025
2 IMF - GDP based on PPP, share of world - October 2025
3 Worldometers - How many Countries in Europe? - October 2025
4 MSCI - MSCI Europe ex UK - 31 October 2025
5 Euronext Corporate Solutions - Insights from the Corporate Governance Barometer 2025 - 8 April 2025
6 FT - Investors flock to ‘ex-US’ stock funds in drive to diversify - 10 October 2025
7 Goldman Sachs - Germany’s Budget May Boost Its Economy More Than Expected - 10 July 2025
8 Financial News - UK Investors flock to Europe - 5 June 2025
9 Vogue - Consumer whiplash in China continues to challenge luxury - 9 January 2025
10 European Council of the European Union - How the Russian invasion of Ukraine has further aggravated the global food crisis - 31 January 2025
11 Stoxx - Eurostoxx 50 - 30 September 2025
12 LSEG - FTSE Europe ex UK - 30 September 2025
13 Euronext - CAC 40 - 30 September 2025
14 Stoxx - Dax - 31 October 2025
15 Independent - The European Union proposes deepening defense industry ties with Ukraine - 25 November 2025
16 Reuters - European business braces for greater impact from US tariffs in 2026 - 10 November 2025
17 Financialcharts.com - Biggest Companies in Europe by Market Cap for Nov 2025 - November 2025
18 MSCI - MSCI Europe ex UK index - 30 September 2025
19 MSCI - MSCI Europe ex UK Small Cap index - 30 September 2025
20 Stoxx - Stoxx European luxury - 31 October 2025
21 Reuters - European stocks step out from US shadow in 2025, but for how long - 6 February 2025
22 Euronews - Challenges facing European markets set to persist through 2025 - 30 December 2024
23 MSCI - MSCI Europe ex UK Small Cap Index - 31 October 2025
24 AIC - Compare investment companies - 20 November 2025
25 BlackRock - Our range - 31 October 2025
Risk Warnings
Investors should refer to the prospectus or offering documentation for the funds full list of risks.
Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.
Past performance is not a reliable indicator of current or future results and should not be the sole factor of consideration when selecting a product or strategy.
Changes in the rates of exchange between currencies may cause the value of investments to diminish or increase. Fluctuation may be particularly marked in the case of a higher volatility fund and the value of an investment may fall suddenly and substantially. Levels and basis of taxation may change from time to time and depend on personal individual circumstances.
Fund-specific risks
BlackRock Greater Europe Investment Trust plc
Counterparty Risk, Currency Risk, Emerging Markets, Gearing Risk, Liquidity Risk
Description of Fund Risks
Counterparty Risk: The insolvency of any institutions providing services such as safekeeping of assets or acting as counterparty to derivatives or other instruments, may expose the Fund to financial loss.
Currency Risk: The Fund invests in other currencies. Changes in exchange rates will therefore affect the value of the investment.
Emerging Markets: Emerging markets are generally more sensitive to economic and political conditions than developed markets. Other factors include greater 'Liquidity Risk', restrictions on investment or transfer of assets and failed/delayed delivery of securities or payments to the Fund.
Gearing Risk: Investment strategies, such as borrowing, used by the Trust can result in even larger losses suffered when the value of the underlying investments fall.
Liquidity Risk: The Fund's investments may have low liquidity which often causes the value of these investments to be less predictable. In extreme cases, the Fund may not be able to realise the investment at the latest market price or at a price considered fair.
