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Fund managers are rushing into eurozone equities and shunning US stocks as fears over political risks breaking up the currency area fade days ahead of France’s election, according to a major survey of global money managers.

Bank of America’s monthly fund manager survey revealed the fifth biggest rotation from US to European stocks since the start of monetary union in 1999 this month. Markets have also turned cool on US stocks amid rising concerns that Donald Trump’s ambitious plans for corporate tax cuts will not be realised this year.

“Investors are showing love for Europe and scrambling out of US equities, as the majority find US stocks overvalued and perceive a risk of delayed tax US reform,” said Michael Hartnett, chief investment strategist at BAML.

Investors’ fears over the eurozone’s political fragility is also fading as polls open in a tight first round French presidential election on Sunday. Of those surveyed, 23 per cent cited a euro disintegration as the single biggest tail risk this month, falling from over 30 per cent in March.

France’s presidential race has been blown open by a recent surge for far-left candidate Jean-Luc Mélenchon, who has promised protectionist economic policies and a fundamental reworking of the EU’s treaties. The firebrand former Socialist will be going head to head with far-right Marine Le Pen, centrist Emmanuel Macron and the right-wing François Fillon.

Eurozone stocks have also become more appealing for money managers, as just under a third think the euro is undervalued. This is the highest proportion since 2002.

Meanwhile, only 5 per cent of investors think Mr Trump’s tax blitz will come into force before the summer, and just over a fifth expect delays to the promise.

BAML surveyed 203 fund managers with a total of $593bn in assets under management.

Copyright The Financial Times Limited 2017. All rights reserved.
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