Sept. 13, 2011, 8:38 a.m. EDT
Fund managers: Europe in recession within a year
Survey also finds managers restore overweighting for U.S. equities
By Barbara Kollmeyer, MarketWatch
MADRID (MarketWatch) — More than half of Europe’s fund managers expect the region will fall into recession in the next 12 months, a factor that has driven risk appetite to its lowest levels since early in 2009, a survey published Tuesday revealed.
The region’s expected to suffer two quarters of negative real growth over the next year, according to 55% of the fund managers polled by Bank of America Merrill Lynch in its latest industry survey. That’s sharply up from the 14% who said they anticipated a recession in July.
Not surprisingly, 68% of respondents see the European sovereign-debt crisis as the biggest among the major risks, which also include challenges for the banking sector. Sentiment towards European banks has dropped to the lowest level since the survey began asking the question in January 2003.
“The survey shows that sentiment on Europe is now so negative that contagion risk to the rest of the world has risen significantly,” said Gary Baker, head of European equities strategy at BofA Merrill Lynch Global Research, in the press release.
The weaker outlook on growth translates to a first net underweight by global fund managers (5%) on euro-zone equities in over two years, with a net 38% now underweight stocks in the region.
“The current very extreme levels of risk aversion indicate that it is time to look for contrarian trades,” noted Michael Hartnett, chief global equity strategist at BofA Merrill Lynch Global Research. Risk aversion has jumped to levels not seen since March 2009, with more than one-third of investors overweight cash.
Full story: http://www.marketwatch.com/story/fund-managers-europe-in-recession-within-a-year-2011-09-13
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