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U.S. Traders Bet Most in Two Years That Europe Has Bottomed Out

U.S. Traders Bet Most in Two Years That Europe Has Bottomed Out

(Bloomberg) -- The worst is over for the European economy, according to buyers of exchange-traded funds.

Investors have poured $1.5 billion into U.S. ETFs focused on European assets in November, data compiled by Bloomberg show. That influx puts the funds on track to take in the most cash in almost two years.

U.S. Traders Bet Most in Two Years That Europe Has Bottomed Out

Improved economic data is tempting investors to take a look at the region. A gauge of European manufacturing rose to a three-month high in November, while another report showed Germany unexpectedly dodged a recession, expanding 0.1% in the third quarter. It’s hardly a stellar comeback, but for some it suggests Europe has stabilized and is starting to bounce back.

“The downward momentum in manufacturing seems to have stalled out,” said Yung-Yu Ma, chief investment strategist at BMO Wealth Management, which had $74 billion of assets under administration as of July 31. “It’s not quite turning around in terms of seeing positive elements, but at least in terms of perhaps hitting an inflection point, we think that’s a likely scenario.”

BMO Wealth Management is currently underweight Europe but “the direction is starting to lean toward neutral,” Ma said.

Flow Leaders

The Vanguard FTSE Europe ETF, ticker VGK, and the iShares Core MSCI Europe ETF, ticker IEUR, led monthly inflows into the region.

VGK, which has its largest allocation to U.K. stocks, has seen about $766 million in inflows this month, the most since January 2018, the data show. And investors have added $436 million to IEUR in November, the most in a year.

Growth in Germany, Europe’s largest economy, could be spurring flows, according to Philip DeAngelo, managing director at Highland, New York-based Focused Wealth Management, which oversees $1.1 billion of assets.

“They just skated by a recession,” he said. “Markets really go up on news like that.”

To contact the reporter on this story: Claire Ballentine in New York at cballentine@bloomberg.net

To contact the editors responsible for this story: Jeremy Herron at jherron8@bloomberg.net, Rachel Evans, Yakob Peterseil

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