Short European stocks still 'most crowded trade,' BAML survey shows

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LONDON (Reuters) – Short positioning on European equities was the “most crowded trade” for the second straight month in April, a survey of fund managers by Bank of America Merrill Lynch found.

FILE PHOTO: The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, April 10, 2019. REUTERS/Staff

Investors called bearish positions on Europe a crowded trade once again, although the market became slightly less pessimistic on the region, according to the survey, released on Tuesday.

Allocations to euro zone equities jumped 8 percentage points month-on-month to a net neutral as some Europe bears unwound their positions, betting the trade had become overcrowded.

Trade war and a China slowdown were joint biggest tail risks, according to the survey of 187 investors with $547 billion assets under management, while growth worries dominated.

Some 66 percent of investors see a “low growth, low inflation” backdrop – the highest level since October 2016.

While an inversion of the U.S. yield curve led many to predict an imminent recession, the survey found 70 percent of investors expect a global recession to start only in the second half of 2020.

A volte-face by the U.S. Federal Reserve on rate hikes

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