Exodus That Led to $100 Billion Hole Returns for European Stocks

(Bloomberg) -- The exit from European stock funds has resumed, just a month after the global risk-on mood led to the biggest inflows since early 2018.

European equity funds lost $0.8 billion in the week through Nov. 20, following four weeks of inflows, according to Bank of America Corp. and EPFR Global data. And they weren’t alone, as investors also pulled money from U.S. and Japanese equity funds, with a net total of $1.5 billion leaving stock funds. Bond funds continued to attract new money.

Funds focused on the European region have given up a massive $100 billion in 2019 alone as a combination of tepid growth and elevated political risks fueled a shift toward safer assets, such as fixed income and cash. The recent reversal in sentiment coincided with a rally in the benchmark Stoxx Europe 600, which surged to a 2015 high last week on optimism that China-U.S. trade talks are progressing and amid reduced fears that the U.K. will crash out of the European Union without a deal.

However, after a month of buying riskier assets, traders are struggling to find fresh impetus to sustain the rally. This week, new concerns emerged about the Washington-Beijing negotiations after a U.S. Senate bill supporting Hong Kong protesters, which President Donald Trump may soon sign into law, a move likely to anger China.

Low investor positioning in European equities has led to several brokers, including JPMorgan Chase & Co. and Bank of America, recommending buying the asset class.

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

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