European Equity Outflows Exceed $2 Billion on Greece Concerns, EPFR Says

Date: Friday, May 7, 2010
Author: Bloomberg

Investors cut their holdings of European equity funds by more than $2 billion in the week to May 5, the biggest outflows in almost a year, amid concern Greece’s debt crisis would spread, according to EPFR Global.

“The damage Greece’s fiscal problems might do to bank balance sheets, Europe’s growth prospects and the ability of riskier sovereign borrowers to tap credit markets kept investors on edge going in May,” the Cambridge, Massachusetts- based research company in an e-mailed release.

The European Stoxx 600 plunged 1.5 percent to 246.90 yesterday, capping three days of declines that have seen 340 billion euros ($431 billion) wiped off the value of its companies. The gauge has retreated 9.3 percent from this year’s high on April 15 amid speculation that a 110 billion-euro rescue package for Greece will need to be extended to Spain and Portugal.

Commodity funds received record inflows of $1.4 billion, EPFR said. China equity funds saw “modest” outflows as the government cracked down on property speculation, while redemptions reached a 45-week high for Latin American equity funds, EPFR said.

European Central Bank policy makers met in Lisbon yesterday as investors looked to them to calm financial markets after the Greek bailout failed to assuage concerns about budget deficits from Portugal to Ireland. ECB President Jean-Claude Trichet resisted pressure from economists to consider buying government bonds to help relieve the fiscal crisis, telling reporters “we didn’t discuss the matter.”

U.S. stocks tumbled the most in a year yesterday on concern Europe’s debt crisis will halt the global recovery. The selloff briefly erased more than $1 trillion in market value as the Dow Jones Industrial Average fell almost 1,000 points, a 9.2 percent plunge that was its biggest intraday percentage loss since 1987, before paring the drop.