The argument goes like this: As European nations go about marrying their national currencies, the wedding will be catered in large measure from the United States.
To understand how, consider the following:
European economies and stock markets are booming. Monetary union and the year-2000 computer problem are forcing European companies to bolster technology investments, which have lagged woefully behind those in the United States. So, with markets still reeling in Asia and with earnings growth slowing in the United States, American multinationals may well be relying more than ever on Europe to maintain profitability.
”The conclusion is that United States companies are uniquely positioned to benefit from these trends,” said Joe Rooney, chief equity strategist at Lehman Brothers Securities in London.
That is partly because Europe remains the bedrock of American business overseas, even if Asia has grabbed most of the headlines in recent years.
James E. Carlson, an economist at Merrill Lynch in New York, said direct investment abroad by American companies has been so vigorous in recent years that the value of the goods and services they produce and sell outside the United States is now three times the total value of all American exports. And fully 60 percent of that external activity is in Europe.
Many analysts say that there is no reason to be indirect about investing in Europe. Buying American stocks to enjoy Europe’s boom, they note, can deny a portfolio the benefits that come with diversifying into a variety of markets.
And buying into Europe through the shares of American multinationals can be expensive; companies like General Electric, Coca-Cola or Gillette, all with strong European businesses, also trade at high price-to-earnings multiples, said Doug Wilde, an equity strategist at Merrill Lynch in New York.
”We see real opportunities in Europe by specifically tapping into European shares,” he said.
Still, some American companies will reap direct benefits from forces at work in Europe. For example, said Mark Howdle, European equity strategist at Salomon Smith Barney in London, Europe’s retailers and makers of brand-name products are likely to suffer as the euro lets Europeans scour the Continent for the cheapest goods. In turn, he said, benefits will accrue to American pioneers in electronic commerce, like Amazon.com, which recently acquired Internet booksellers in Britain and Germany.