European equity funds have recorded their biggest weekly inflow in over 13 months as March draws to a close, while U.S. equity fund flows head in the opposite direction, according to data from EPFR Global.
Increasing momentum for pro-business candidate Emmanuel Macron in the upcoming French presidential election, at the expense of his populist rival Marine Le Pen, has helped ratchet down the fear factor over European politics. Similarly, the more conciliatory tone that accompanied the beginning of the Brexit process this week was instrumental in further dampening down political nerves. These events both follow the crushing defeat of populist candidate Geert Wilders in the Netherlands' prime ministerial elections earlier this month.
Taking the spotlight off of the political situation in Europe has prompted investors to pay closer attention to the economic situation on the continent which has recently shown some reasons for cautious optimism. Unemployment sits at a six-year low within the bloc and the most recent growth figures have kept pace with those out of the U.S.
Looking more closely at the euro zone's largest economy, Fathom Consulting argues that despite the 5.6 percent rise in the main German index, the DAX, seen so far in 2017, there is more to play for.
"We see further upside potential throughout the year," said a note from the economists to clients on March 31.
"We anticipate the German economy will expand by 1.8 percent this year, outperforming both the consensus and the euro area as a whole," the note added.
Meantime, U.S. equity funds recorded their second consecutive week of outflows in the last week of the month, with Bank of America analysts pointing to the botched attempt by U.S. President Donald Trump to repeal former President Barack Obama's health-care plan as the key driver of the unwind of some "aggressive fiscal stimulus trades" focused on infrastructure, materials and U.S. value stocks.