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Why German Equities Look Attractive

Even as the euro area economy as a whole remains weak, Germany, arguably the currency bloc's strongest economy, is slowly recovering. The chart below is a ratio of iShares MSCI Germany Index (EWG) over CurrencyShares Euro Trust (FXE), representing a currency-hedged look at German equities. As the euro broadly declined in recent months, the indicator below is up nearly 24% since October.

(click to enlarge)

Data provided by Trading View

After declining during the initial Greek crisis, economic growth in Germany broadly recovered. In the third quarter, the economic growth figure came in at an annual pace of 2.15%, above the previous quarter's reading of 1.82%. After bottoming at a contraction of -0.62% in 2013, economic growth in Germany steadily increased, as is seen in the chart below. Private consumption and foreign trade made the largest contributions to Germany's third quarter economic growth reading.

"Quarter-on-quarter, private consumption grew 0.7 percent,