EUROZONE: the decisive support for 2024 worked

  press review | August 14, 2024

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Capitalbolsa - 14.08.2024

From EUROSTOXX50, “Key support for 2024 worked”. The main European index reacted at the beginning of the month in the range between 4,375 and 4,470 points, the area of ​​​​the maximums for 2021 and 2023, which has now served as support.

The exposed range, as expected, is enriched by the passage of the bullish trend that connects the lows of 2020 with those of 2022, currently passing around 4,260 points. The validity and robustness of the upward trend from 2020 therefore depends precisely on compliance with these points.

  

The EURO STOXX 50 index is composed of the fifty most valuable companies in the Eurozone. Find out how the EURO STOXX 50 is made up and how to invest in it.

Let's find out what EUROSTOXX is

For investors, the EUROSTOXX 50 is one of the most important indicators of the European stock market. The index consists of the fifty largest publicly traded companies in euro countries, including many well-known European brands. Due to the good tradability of the underlying stocks, many financial products are based on the EUROSTOXX 50, such as options, futures and Exchange Traded Funds (ETFs). The index is also a widely used benchmark against which investors compare the performance of their portfolios.

STOXX Limited, an affiliate of the Deutsche Börse Group, developed the index and launched it in early 1998. According to STOXX, the index represents the most important listed companies (so-called "blue chips") from the largest sectors of the 'Eurozone, i.e. the ''super sector leaders''.

Let's calculate the EUROSTOXX 50

The EURO STOXX 50 is a so-called capital-weighted index, where the market value determines the weight of each individual stock in the index. Market capitalization is obtained by multiplying the number of shares outstanding by their current price. Shares of companies with a large market capitalization have a greater weight in the index than shares of companies with a smaller market capitalization.

A correction is made for the number of shares that can be traded freely, the so-called 'free float'. Shares that are not freely tradable are therefore not included in the determination of the market value. This way, only the 50 largest and most liquid stocks are included within the EUROSTOXX 50. 

The EUROSTOXX 50 comprises 60% of the free float market capitalization of the EUROSTOXX Total Market Index (TMI). The value of the index is calculated by adding the free-float market capitalization of all stocks in the index and dividing it by the so-called divisor. This ensures that the EUROSTOXX 50 does not become too large a number. The divisor also neutralizes the influence of corporate actions such as a special cash dividend, a spin-off or a rights issue.

                                                   Free floating market capitalization of the Index

                              Index = -------------------------------------------------------------------------

                                                                                      Divider

The STOXX has its own sector classification system with 19 super-sectors, 41 sectors and 114 sub-sectors. The EURO STOXX 50 selection list consists of the most important stocks (by free float) from the 19 EUROSTOXX super-sectors, such as technology, oil and gas, telecommunications, healthcare and retail. The composition of the index is reviewed annually in September. The current one is shown below.

We reveal the composition of the EUROSTOXX 50

The Eurozone currently includes 19 countries. However, not all are represented in the index. The EUROSTOXX 50 currently consists of stocks from the following eight euro countries: Belgium, Finland, France, Germany, Ireland, Italy, the Netherlands and Spain. At the end of 2021, France (37.3%) and Germany (31.6%) were dominant, followed by the Netherlands (16.4%), Spain (5.5%) and Italy (5.1%). In terms of sectors, technology (16.8%), manufacturing (14.4%) and consumer products and services (13.8%) stand out. The Dutch chip machine manufacturer ASML had the largest weight (9.01%) at the end of 2021. This was followed by the French luxury group LVMH (5.91%) and the German chemical company Linde (4.82%).

Price index is the EUROSTOXX 50

The EUROSTOXX 50 is a price index. This means that dividends distributed by companies are not included in the calculation of the index value. The symbol of the euro price index is: SX5E. The index started on February 28, 1998 with a value of 1000. To calculate the trend of the total return of the EUROSTOXX 50 there is also a total return index. In the calculation, dividends are reinvested. In addition to the euro, the index is available in the following other currencies: US dollar, British pound, Japanese yen, Canadian dollar and Australian dollar. The EUROSTOXX 50 ESG was also launched in April 2019, a version that also takes sustainability criteria into account in the selection of securities.