The Euro Stoxx 50 is one of the major European stock market indices and it is highly popular with traders.
If you are interested in this index and wish to trade on it through the CFD then we recommend you learn more about it including how the rate is calculated, its history and composition.
In this article you will find all that information and much more to ensure you have everything you need to know to speculate online on this highly popular asset.
Information that you should know about the Euro Stoxx 50 index:
To complete your knowledge about the Euro Stoxx 50 index, here is some additional information summarized in a few lines with some key elements about it:
- The Euro Stoxx 50 index is defined by the association of the American index provider and the Stock exchange of Frankfurt and Zurich through the Dow Jones Euro Stoxx.
- The Euro Stoxx 50 depends on the ranting position of the euro zone only and not on the European union.
- The first quotation of this stock index was made on December 31, 1991 on the basis of 1000 points.
- The highest level ever recorded by the Euro Stoxx 50 index is 5464.43 points at closing in March 6, 2000.
- Its lowest historical record was reached on October 5, 1992 or less than a year after its first listing with a level of 920.65 points at the closing.
- The frequency of diffusion of the Euro Stoxx 50 index is approximately 15 seconds.
- The Euro Stoxx 50 index is quoted every day between 9 and 17h30.
- The calculation of the quotation of the Euro Stoxx 50 is based on the weight of the companies that make up the index according to their market capitalization. This means that the companies with the highest capitalizations have a greater weight than those with a lower capitalization. In addition, the calculation of this quotation does not takes into account the dividends generated by stock market securities
- The institution responsible of the publication and listing of the Euro Stoxx 50 index is the advisory board which is currently composed of 9 members.
- The composition of the Euro Stoxx 50 index consist of 50 different stock values from companies belonging to the 13 countries members of the Euro Zone and which have been selected on the basis of their total market capitalization, trading volume as well as their sector of activity. This index also takes into account a relatively precise ponderation by country and by sector of activity in order to match better the reality of the economic structure of the Euro zone.
- The other stock market indexes associated to the Euro Stoxx 50 are the Dow Jones Euro Stoxx which is the largest index of the euro zone and count with 300 values, the Dow Jones stoxx and the Dow Joness Stoxx 50 are respectively the largest index and the index corresponding to the values of 17 western European countries. These are sectorial indices.
- The geographical distribution of these securities that make up the Euro Stoxx 50 index is the following: 34% of those securities are French securities, 23.82% are German securities, 13.12% are Spanish securities, 12.46% are Dutch (Netherlands) securities, 11.98% are Italian securities and 3.72% are Dutch (Holland) securities and 0.91% are Irish securities.
How is the price of the Euro Stoxx 50 index calculated?
The Euro Stoxx 50 market was created in 1998 and contrary to what we could think, it is not an European company but an American company which is at the origin of it. It is in fact the Dow Jones company, known for its DJ30 index, that created this European stock index. This index was created to represent the 50 strongest market capitalizations, as well as the most representative of the twelve European financial centers, regardless of their origin. The selection of these companies is done once a year, in the month of August and meet certain specific criteria.
The Euro Stoxx 50 market was launched the day before the creation of the Euro zone. Its purpose was to fulfill the needs of Anglo-Saxon investors who wanted to get information about the general economic health of this group of European countries and not of each country independently. It was therefore originally an index used to know the financial health of Europe.
The choice of these companies was in fact done among a selection of the 600 most important market capitalization of the euro zone. The system for calculating the Euro Stoxx 50 index is far too complicated to be explained here simply but know that it takes into account mainly the ranking of the companies that comprise the selection. It is therefore the variations observed in this selection that directly influences the course of this index.
The composition of the Euro Stoxx 5O includes today the stock market capitalization from several European countries such as Germany, France, Netherlands, Italy, Belgium, Spain, Ireland, Finland and Portugal. All those values must also show a certain stability in order to become part of it.
The historical rates of the Euro Stoxx 50 Index:
It was only fairly recently, on 26th October 2009, that the Euro Stoxx 50 stock market Index was quoted for the first time. Its opening rate was 2895.76, and the first day it closed at 2834.82.
The lowest historical level reached by this index was 1937.92 in 2001; the lowest closing price was also in 2001, at 1995.01.
The highest historical level reached was 3076.28 in 2011 and the highest closing position reached was 3068, also in 2011.
The composition of the Euro Stoxx 50 stock market Index:
As we noted earlier, the Euro Stoxx 50 Index is composed of 50 companies quoted within the Euro zone. We find:
- 19 French companies (Air Liquide, Airbus, AXA, BNP, Carrefour, Danone, Essilor, GDF Suez, Société Générale, L’Oréal, LVMH, Orange, Saint-Gobain, Sanofi, Schneider, Total, Unibail, Vinci, Vivendi)
- 14 German companies (Allianz, BASF, Bayer, Bayerisch Motoren, Daimler, DeutscheBank, Deutsche Post, Deutsche Telekom, E.ON, Munich Re, RWE, SAP AG, Siemens AG, Volkswagen)
- 6 Spanish companies (Banco Bilbao, Banco Santander, Iberdrola, Inditex, Repsol YPF, Telefonica)
- 5 Italian companies (Assicurazioni Generali, ENEL, Eni, Intesa SanPaolo, Unicredit)
- 4 Dutch companies (ASML, ING Group, Philips, Unilever)
- 1 Belgian company (Anheuser-Busch Inbev)
- 1 Finnish company (Nokia)
We would draw your attention to the fact that this classification was noted in 2014 but is not permanently fixed.
Detailed composition of the euro Stoxx 50 index
To be able to anticipate better the price fluctuations of Euro Stoxx 50 index, here you find the detailled composition with the companies list and their weights in the index in 2017.
- Total with 6.25%
- Sanofi-Aventis with 4.70%
- Banco Santander with 4.42%
- Bayer with 4.18%
- Siemens AG with 4.06%
- BASF with 3.91%
- Daimler AG with 3.35%
- Anheuser Busch Inbey with 3.17%
- Banco Bilbao Vizcaya Argentina with 2.72%
- Allianz with 2.71%
- BNP Paribas with 2.64%
- SAP AG with 2.64%
- ENI with 2.60%
- Telefonica with 2.49%
- Unilever with 2.49%
- Schneider Electric with 2%
- ING Group with 1.98%
- LVMH with 1.90%
- Deutsche Telekom with 1.89%
- AXA with 1.81%
- Nokia with 1.76%
- Unicrédit with 1.74%
- Deutsche Bank with 1.71%
- Air Liquide with 1.65%
- Intesa Sanpaolo with 1.61%
- Société Générale with 1.59%
- Danone with 1.54%
- GDF Suez with 1.53%
- L’Oréal with 1.50%
- Iberdrola with 1.47%
- Bayerische Motoren Werke with 1.45%
- E.ON with 1.45%
- Vinci with 1.44%
- Airbus Group with 1.42%
- ENEL with 1.38%
- Volkswagen with 1.38%
- ASML with 1.30%
- Munich Re with 1.27%
- Deutsche Post with 1.21%
- Vivendi with 1.18%
- Inditex with 1.16%
- Orange with 1.12%
- Assicurazioni Generali with 1.07%
- Philips with 1.05%
- Unibail Rodamco with 0.99%
- Saint-Gobain with 0.97%
- Essilor with 0.83%
- Carrefour with 0.83%
- Repsol YPF with 0.80%
- RWE with 0.74%
By country, the Euro Stoxx index is composed of :
- 36.80% of French companies
- 28.41% of German companies
- 13.73% of Spanish companies
- 10.93% of Italian companies
- 6.32% of Dutch companies
- 2.07% of Belgian companies
- And 1.74% of Finnish companies
Trading on the Euro Stoxx 50 using CFDs:
Using CFDs available from the majority of Forex brokers it is possible to speculate on the value of the Euro Stoxx 50 index, on the rise as on the fall.
To anticipate future movements of this index it is necessary to take into account all news and events relative to Europe and the Euro Zone. The various official press releases and figures relative to the major European indices such as the CAC 40 and the DAX 30 can also influence this market.
One of the organisations that should be followed closely is the Central European Bank whose decisions are strongly influential on the European markets.
Historical technical analysis of the price of the Euro Stoxx 50 index
This period started with a bullish peak reached by the end of 2007 with a level of 4446 points. But this increase was immediately followed by a sharp decline caused by the economic crisis that affected most of the other values too. In March 2008, the price fell to 3500 points before attempting to recover to 3800 points in May of that same year. But the bearish trend took the lead, always with strong volatility that led it to the level of 1817 points in March 2009 which was the lowest record of the century. Fortunately, the reaching of the goal of the psychological threshold of 2000 points then led to the taking of strategic positions to purchase with a gradual rise of the index price. Which tried to reach several times the goal of 3000 points for a first time in January 2010, and then in April 2010 and finally in February and May 2011, each time without success.
The month of June 2011 marked a new downward trend of this index with a lost that made it come back to 2026 points in September 2011. In March 2012, the value regained some lost points and reached the level of 2600 points before dropping once again to the level of 2068 points in June 2012.
It was in this precise moment that a first real upward trend in the Euro Zone’s economic recovery began. By the end of 2013, the index was able to overcome the major resistance of the 3000 points and headed towards the level of 3300 points in June 2014. This marked a new punctual bearish correction that made it lose some points 2991 points in October 2014.
Despite this correction, the rise took the lead until reaching the level of 3816 points in April 2015 after a particularly volatile change. This sudden recovery resulted of course in significant profit that made the value fall down again to the level of 3000 points in October 2015 and then to 2750 points in February 2016 after a tentative to recover to 3500 points in November 2015.
Throughout 2016, the price of the Euro Stoxx 50 hesitated as to the direction to take and evolved upward and downwards ranging between 2,750 and 3,150 points passing alternately above and below the 3,000 points mark which seems to represent a strategic pivot point. But the beginning of 2017 marked the beginning of a new upward trend that seemed relatively stable and solid. This helped it to reach the level of 3,660 points in May 2017 and 3,660 points in November of the same year.
It seems obvious that this rise is likely to continue until the psychological threshold of 4000 points. However, and if this is the case, the most probable scenario would be a momentary return down compared to this major resistance and the profit taking by prudent investors in the context of a still hesitant economic growth in the euro zone.
The best strategies to trade on the price of the Euro Stoxx 50 Index:
Like most of the other stock market indexes, the Euro Stoxx 50, allows you to set up several types of online trading strategies through CFDs proposed by different online trading platforms.
Among the possibilities offered to you, we can mention the scalping indexes, the day trading and trading on the long term or swing trading. Here are some explanations about these strategies which are the most popular among stock index traders.
- The day trading: This strategy of investment is use mainly to trade indexes through CDFs. As its name implies, it consists in negotiating the asset in only one same day. To practice this strategy, the investor has to open and close his positions during the day and that all its positions are closed by the closing of the market. In addition, since the Euro Stoxx 50 is a very volatile index, the differences in prices are significant in the short term.
- Index Scalping: This strategy demands a little more technical knowledge than the previous one, it is an investment method on the very short term. The positions of the Euro Stoxx 50 index will be opened and closed in some minutes, or even less than a minute. The Swing trading requires high concentration and has to be done during periods of very high volatility. If you do not feel able to do it alone, there are trading robots that can help you.
- Swing trading or long-term trading: trading on the Euro Stoxx 50 index through CFDs is particularly suitable for this long term investment method. One of the advantages of this strategy is that it does not require the continuous attention of the investor. However, it is strongly recommended to use very small leverage or no leverage with this strategy which may represent significant risks. In fact, if the leverage effect can increase your earnings, it can also significantly increase your losses in the long term. To reduce your risks, it is of course advisable to carefully choose the stop and limit orders that you will place on your positions in order to close them in the most appropriate moment.