In the last five weeks American investors withdrew $1.6 billion from the iShares Currency Hedged MSCI Eurozone ETF, as they lost interest for European shares.
European stocks fell by 20% over two months. This may result in a great deal of scepticism across equity markets, which will remain high until December. Even prospects for increased stimulus after the European Central Bank meeting last week couldn’t change US investors’ sentiment.
According to the Bank of America, fund managers pulled $3.3 billion from European equity funds in the week ended March, 9. As a result outflow of funds was recorded over five consecutive weeks, the worst figure since October, 2014. Thomas Thygesen, an analyst at SEB AB, said that “the markets looked out of control and there was a lot of distrust in the ability of central banks to avoid a recession”. And the rate hike by the Federal Reserve is the last ingredient US investors need to make a comeback.
It should be mentioned that investors started to sell European shares in December last year, shortly before ECB President Mario Draghi underwhelmed investors by failing to ease monetary policy as much as it was expected. In February, Janet Yellen, Federal Reserve Chair, announced that weakening stock prices is a risk for the economy.
At the same time, experts see improved sentiment regarding China and stabilizing oil prices that support European market strength.
