Live Markets: In Europe, 'the pessimists are back'

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19/05/2026 11:29

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IN EUROPE, 'THE PESSIMISTS ARE BACK'

Bank of America's monthly global fund manager survey for May showed that pessimism over global growth was "melting away", as managers raised their allocation to equities at the fastest pace on record. Earnings growth, coupled with a hope that the Federal Reserve will eventually cut rates, has helped drive flows. Just 4% now see a hard landing for the economy.

That optimism doesn't stretch very far. The bank's survey of European fund managers showed a net 4% say they are underweight European equities relative to global markets, while a net 35% said they were overweight at the start of the Iran war. The regional surveys, which polled 92 participants with $209 billion in assets under management from May 8 to May 14, showed a net 20% of European managers said they were overweight U.S. equities, compared to a net 22% saying they were underweight before the war.

"This constitutes one of the sharpest rotations out of Europe and into the U.S. on record (with data going back to 1999)," Bank of America said. "The pessimists are back."

51% expect U.S. equities to outperform Europe over the next twelve months, up from 29% in April, the survey showed.

Europe's greater exposure to a possible energy-price shock stemming from the war in Iran, together with the concentration of cash in the big U.S. hyperscalers rolling out artificial intelligence data centres, has made investors generally wary of putting money into the region.

That view looks like it may be justified, given equity market performance so far this year. The S&P 500 .SPX is up 7.2% so far this year, led by a 12% gain in the seven biggest tech stocks MAGS.K, while Europe's STOXX 600 .STOXX is up around 3.9%.

(Amanda Cooper)

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EARLIER ON LIVE MARKETS:

ROBOTS MAY HELP OFFSET CHINA'S LABOUR SHORTAGE- BARCLAYS  CLICK HERE

CENTRAL BANKS LIKELY TO TIGHTEN EVEN WITH PEACE DEAL CLICK HERE

LOOKING ON THE BRIGHT SIDE CLICK HERE

EUROPE BEFORE THE BELL: WATCHING THE NEGOTIATIONS CLICK HERE

MARKETS IN UNEASY CALM AS INFLATION FEARS TAKE ROOT CLICK HERE

Chips ahoy https://www.reuters.com/graphics/USA-STOCKS/WEEKAHEAD/zdpxgeewmvx/chart.png

G7 bond yields https://www.reuters.com/graphics/AUTOMATED-20260518/G7-BOND-YIELDS-SINCE-2008/dwpkybegmpm/chart.png

European optimism https://www.reuters.com/graphics/GLOBAL-STOCKS/zgpolxnmqvd/chart.png