$50 Billion Hole Grows as Carnage Strikes European Stock Funds

(Bloomberg) -- The U.S. market led last week’s equities turmoil, but unloved European stocks still managed to stand out -- in a bad way.

European equity funds lost the most money in 27 weeks, bleeding $4.8 billion in the five sessions ended Oct. 17, a period that includes last week’s global market carnage, according to Bank of America Merrill Lynch, which cited EPFR Global data. In contrast, Japanese and emerging-market stock funds managed to attract investor money.

The latest exit solidifies Europe’s pariah status among stock investors, as the region’s equity funds have now lost $50.4 billion this year, by far the most among major geographies. While U.S. stock funds saw outflows of $14.8 billion in the past week during a market slump driven by concerns over Federal Reserve rate increases, their flows remain net-positive since the start of the year.

“Sentiment remains very slushy with regards to European stocks,” said William Hobbs, head of investment strategy at Barclays Investment Solutions in London. “The unpopular populist budget in Italy, a seemingly intractable impasse in Brexit negotiations, and an array of idiosyncratic problems still dogging the banking sector allied to fears of an interest rate choke in the U.S. all seem to be playing a role.”

The Stoxx Europe 600 Index fell to the lowest level since late 2016 last week, and has been struggling to rebound as investors confront concerns about Brexit and Italian budget negotiations. Global investors’ shift toward value shares is seen as beneficial for European equities because of the large proportion of financials in the region. Strategists surveyed by Bloomberg expect the Stoxx 600 to advance about 10 percent by the end of the year.

To contact the reporter on this story: Ksenia Galouchko in London at kgalouchko1@bloomberg.net

To contact the editors responsible for this story: Blaise Robinson at brobinson58@bloomberg.net, John Viljoen, Jon Menon

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