The MSCI World index dipped 1% last week, euro zone stocks shed only 0.3% over the week after making a new record high, and the MSCI Asia ex-Japan index rose 1.5% for a sixth weekly gain in a row. That is its best run since November, 2022.
A rotation out of Wall Street into Europe and Asia appears to be underway, an one can see why - U.S. stocks are over-owned, valuations are expensive and positioning is stretched. Europe and Asia look attractive.
EPFR-tracked Europe equity funds in the third week of February recorded their biggest inflow since early 2022 and Chinese tech stocks listed in Hong Kong have surged a stunning 35% in the past six weeks.
That momentum is unlikely to last, and next week could see a retracement. But the major indices in mainland China, Japan and India are still in negative territory for the year - could their weak exchange rates tempt a wave of inflows?
Investors cheered President Xi Jinping's meeting last week with Chinese tech and other business leaders, and the feel-good factor seems to be making up for nervousness around the yuan and uncertainty surrounding the threat of U.S. tariffs and potential trade war.
