Euro fears abound despite the facts

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In a recent poll on fundweb.co.uk, readers were asked what was their biggest fear for the remainder of 2013 out of the events in the US, emerging markets and closer to home.

Interestingly, despite all the recent negative headlines about the prospect of tapering in the US and worries over an economic slowdown in China, it was the fear of a resurgence of the eurozone crisis that just under half of the respondents listed as their biggest worry.

Since that poll was conducted, however, there has been good news for the region that might quell these fears. Last week it was announced that having expanded by 0.3 per cent in the second quarter of 2013 the eurozone economy had exited an 18-month long recession, the longest it has experienced.

Following this news, it was reported by the fund flow analyst EPFR Global that European equity funds benefitted from more than $2bn (£1.3bn) in new money during the week ending 14 August, which represented a 66-week high.

To additionally ease investors’ concerns about Europe, the latest Bank of America Merrill Lynch survey for August revealed investor optimism on the eurozone hit a nine-year high. According to the survey, no fewer than 88 per cent of European fund managers now anticipate the region strengthening in the year ahead, which is twice the level recorded in last month’s survey.

Indeed, owing to the increasingly positive macro views on the eurozone, a net 20 per cent of global managers said they would overweight the market on a 12-month view, which is the highest reading for the survey in over six years and made it the top choice region, ahead of Japan.

So if the eurozone does not turn out to be the nightmare many fear, what should they be fretting about? Sitting in equal second with fears of an economic slowdown in China, voters in the Fundweb poll were worried about the effects of tapering in the US, a subject tackled by Daniel Ben-Ami in this week’s Fund Strategy.

Ben-Ami takes an in-depth look at the implications of the US Federal Reserve turning down the money tap, a subject which has continuously set markets aflutter when its possibility is mentioned.