* Inflows into European stocks accelerate -Lipper
* Euro-zone equities rise in August while U.S. stocks fall
* Investors positioning for gains in Europe -survey
By Angela Moon
NEW YORK, Aug 18 After Wall Street's biggest
weekly decline since June and the worst week this year for the
Dow average, investors will be searching for a rebound.
But the best gains may not be at home as investors take
notice of an improved outlook in Europe.
Fund managers have started to shift to euro-zone equities
after a series of economic indicators showed the region finally
emerging from recession.
The region outperformed U.S. stocks in recent weeks, ending
0.2 percent higher last week while Wall Street underwent a 2
percent weekly loss. For the month so far, the total return of
euro-zone equities is around 1.9 percent compared with a 1.8
percent loss for the S&P 500 index.
That's a very different picture from the first half of the
year when the S&P 500 posted 12.6 percent growth, while the
pan-European FTSEurofirst 300 index had a mere 1.6
The change might point to which parts of the U.S. market are
likely to perform well after a long run by companies that do the
lion's share of selling within America's borders.
"The increase in volatility and uncertainty we've seen
throughout the euro zone is finally coming to an end," said
Diane Garnick, chief executive of Clear Alternatives, an asset
management firm in New York.
"We are much more comfortable looking at U.S. international
companies that have exposure in Europe, given the stability we
see there now," Garnick said, adding that she favors Johnson &
Johnson over other stocks with big exposure to the
domestic market like Walgreen Corp.
Flows into European equities from U.S.-based funds hit a
two-month high in the week that ended Aug. 14, data from Thomson
Reuters Lipper service showed, signaling steady investor
appetite for the single-currency bloc.
A Lipper basket of 92 funds invested in European shares,
which include exchange-traded funds' (ETFs) holdings, took in a
net $755 million, the biggest inflow since a record $1.17
billion in mid-June and a rise from the prior week's $580
A Bank of America Merrill Lynch survey of fund managers for
August showed a net 20 percent of respondents would overweight
the European market over a 12-month period, the highest reading
in over six years. That made investors' top choice over this
horizon Europe, ahead of Japan.
"With macroeconomic views of the euro zone increasingly
positive, investors are positioning for gains in the region's
equities," the survey said.
But while money managers are talking about an undervalued
Europe, euro-zone troubles have not disappeared. Germany's
quarterly growth still was just 0.7 percent.
U.S. stocks have been hit recently by weak earnings from
bellwethers like Wal-Mart Stores and Cisco Systems
and by concerns that the Federal Reserve may start
reducing its bond-buying program as early as next month.
Investors will get a better sense of what the Fed's plan is
this week from the central bank's July meeting minutes to be
released on Wednesday at 2:00 p.m. EDT (1800 GMT).
Economic indicators during the week include existing-homes
sales, also due on Wednesday, weekly jobless claims and PMI
Markit Flash manufacturing index on Thursday. New-home sales
data is due on Friday.
APPLE AT $500
Shares of Apple Inc jumped nearly 11 percent last
week, outperforming the Nasdaq, which ended 1.6 percent lower.
Trading volume soared both in the stock and options markets last
week after billionaire Carl Icahn said he owns a big stake in
the company, which he believes to be undervalued.
"It's almost like 'sell the market and buy Apple,'" said
J.J. Kinahan, chief strategist at TD Ameritrade in Chicago.
"I think the next level to look for is around $520 and $525,
which are the areas with a lot of options activity," he said,
adding that if Apple shares move above these levels, they have
the potential once again to become a Wall Street darling. The
stock ended 0.9 percent higher at $502.33 on Friday.
Entering the last week of earnings announcements, a number
of retailers are due to report, including J.C. Penney Co
on Tuesday. Target Corp is due to report on Wednesday
and GameStop Corp is scheduled to report on Thursday.
Home improvement stocks including Home Depot and
Lowe's are also due during the week. Data on Friday
showed U.S. housing starts and permits for future home
construction rose less than expected in July, suggesting that
higher mortgage rates could be slowing the housing market's
Home Depot's shares are up nearly 22 percent this year and
Lowe's stock has risen nearly 45 percent so far in 2013.