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7 Undervalued European Stocks To Diversify Your Portfolio During Debt Talks

James Dennin, Kapitall: With uncertainty in the US, investors may look abroad. We found seven undervalued European stocks to consider.

The US debt ceiling debate rages on and while many analysts seem to agree that a deal will be reached, it's also safe to say people are considering other markets as safer bets for their money.

[Read more on Europe from Kapitall: 3 Profitable European Stocks Amidst Mixed Messages from the Continent]

For one, there's China. After a long appeal, the Chinese government has succeeded in lobbying the British government to roll back regulations on the use of Chinese currency in England. The result is that London's stock exchanges will become the Western center for trading Chinese stocks. Not US exchanges.

Which does not necessarily bode well for New York's bid to get the highly lucrative, much anticipated Alibaba IPO. With regulations rolled back, British investors can apply for licenses to trade Chinese currency directly, and China would move operations of its three biggest banks to London, from Luxembourg.

While the United Kingdom was already the biggest center of overseas trading for China, at about 5 trillion RMB per day, the move will make it easier for Chinese banks to secure financing in the west, and give British banks valuable inroads. 

Now, this doesn't necessary mean the relevance of the US markets is declining, simply because of prolonged budget negotiations.

The government shut down often -  eight times in fact - when Ronald Reagan and Tip O'Neill were in charge of the executive and legislative branches respectively. While these shutdowns were smaller, and didn't follow a US credit downgrade, there is a strong argument to be made that the media is exacerbating the situation.

Investing ideas

That being said, there are some investors who might be interested in moving their money away from American companies until a compromise is reached. While US stocks in general are up as of this morning, and have performed fairly well over the week, a lot of that has to do with Janet Yellen's appointment to the Fed.

She is unlikely to end tapering, and quantitative easing is generally very good for the stock market.

But for those investors looking to hedge their risk against the ramifications of further political squabbles, consider Europe, where the re-election of Angela Merkel, a buoyant French stock market, and even the possibility of a Greek turnaround are improving sentiment.

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