World's largest asset manager upgrades Europe to 'overweight' as fund inflows rise

BlackRock has given the thumbs up to prospects in Europe with an upbeat view of the region in its investment Institute mid-year outlook for global markets.

Wei Li, global chief investment strategist at BlackRock Investment Institute, said in a media briefing on 7 July to launch the institute's 2021 Midyear Outlook report that "the powerful economic restart is broadening, with Europe and other major economies catching up with the US.

"We expect a higher inflation regime in the medium term - with a more muted monetary response than in the past. Tactical implication: We go overweight European equities and inflation-linked bonds. We cut US equities to neutral."

It upgraded European equities to overweight "on the back of the broadening restart. We see a sizeable pickup in activity helped by accelerating vaccinations.

Valuations remain attractive relative to history and investor inflows into the region are only just starting to pick up."

The asset manager added "We are moderately pro-risk and look for opportunities from any turbulence to increase risk: Negative real, or inflation adjusted, bond yields should support equities. We see potential for cyclical shares and regions to benefit from a broadening restart. We are turning positive on European equities and upgrading Japanese equities to neutral - and cut US equities to neutral.

Even if yields remain low, the direction of travel is up - and we remain underweight developed market (DM) government bonds."

Click here for the full 2021 Midyear Outlook report by the BlackRock Investment Institute.  

Elsewhere, in the UK Investment Association's money fund stats update, one of the highlights was that Europe funds experienced inflows of £101m for May after four months of outflows, following a period of strong performance from European stocks.

Chris Cummings, chief executive of the Investment Association, said: "The overall mood remains positive as we head into the summer. In response to European stocks performing well, UK savers invested £101m into Europe funds - the first month of inflows to this region this year. Elsewhere, it was encouraging to see that demand for responsible investment funds remains high, reaching flows of £5.5bn year-to-date."