When people talk about how European stocks did today, they often mean one of two indices: Germany’s DAX or the Euro Stoxx 50. The DAX covers one country. The Euro Stoxx 50 covers the whole eurozone, which makes it the closest thing to a single scoreboard for the region’s biggest companies. For UK traders, it is also a useful comparison with the FTSE 100.
What the Euro Stoxx 50 is
The Euro Stoxx 50 tracks 50 of the largest and most traded companies in countries that use the euro. It is run by Stoxx, part of Deutsche Börse Group, and it is weighted by the market value of shares freely available to trade. Larger companies therefore have a bigger effect on the index.
Its members span luxury goods, banking, energy, technology, carmakers, chemicals and consumer brands, with French and German companies making up the largest share. Dutch chip equipment, French luxury houses and German industrial and software groups are among the heavyweights.
How it differs from the DAX and FTSE 100
The DAX covers 40 German companies and is a total return index, meaning dividends are added back into the level. The Euro Stoxx 50 is quoted as a price index, so the two can drift apart over time for that reason alone.
The FTSE 100 is not in the eurozone and has a very different mix, with more energy, mining, banks and consumer staples and much less technology. That is why the FTSE 100 often does well when oil and commodity prices rise, while the Euro Stoxx 50 can be more sensitive to technology and luxury spending. Our guide to the FTSE 100 explains its make-up.
What moves the index
European Central Bank policy is a big driver. Lower interest rates usually support shares, while higher rates can hurt more indebted companies and lift banks. The euro matters too, because a weaker currency helps exporters.
Global demand is another. Many Euro Stoxx 50 companies sell heavily to China and the US, so trade tensions, Chinese growth figures and US consumer spending can all move the index. Energy prices also matter a great deal for Europe’s industrial companies, which is why oil and gas spikes tend to weigh on the region.
How traders use it
Euro Stoxx 50 futures are among the most traded equity futures in Europe. Traders use them to take a view on the whole region or to hedge a portfolio of European shares. Options on the index are also widely used, and the VStoxx index measures expected volatility in the same way the VIX does for the S&P 500.
Because it is a broad regional benchmark, the index is also a common reference for European fund performance. Our explainer on index futures covers how these contracts work.
The beginner takeaway
If you want one number that tells you how the eurozone’s biggest companies are doing, the Euro Stoxx 50 is it. Compare it with the FTSE 100 and you will often see the difference between a technology-led market and a commodity-led one. For today’s moves across Europe, this morning’s Morning Market Brief has the picture. If you want to understand how you approach index trading, the free Samuel & Co Trading Trader Assessment is a good place to start.
