Europe is staging a comeback in investor portfolios while concerns about the US fiscal cliff have taken center stage, according to the BofA Merrill Lynch Fund Manager Survey for September.
The EU sovereign debt crisis is no longer the top tail risk identified by investors, for the first time since April 2011, having been surpassed by the US fiscal cliff. The proportion of the panel who mostly fear EU sovereign risk fell to 33 percent from 48 percent in August. The US fiscal cliff has become the biggest tail risk for 35 percent of global investors. “Investors now view the US fiscal cliff as a greater threat than the euro zone — and the upcoming election is putting these fears into sharper focus,” said Michael Hartnett, chief investment strategist at BofA Merrill Lynch Global Research.
Asset allocators have taken an overweight position in euro zone equities for the first time since February 2011 when the euro zone sovereign crisis deepened. A net 1 percent of global asset allocators are overweight the region compared with a net 12 percent underweight in August. For the first time since summer 2009, the survey has recorded three consecutive months of double-digit positive swings toward European equities. A net 9 percent of global investors say that the euro zone is the region they most want to overweight in the coming 12 months, compared with a net 5 percent nominating region as their top prospective underweight in August.
Pessimism within Europe is fading, according to the Regional Fund Manager Survey. European investors are equally split on whether region’s economy will strengthen or weaken in the next 12 months – whereas in August a net 23 percent said it would weaken. Risk appetite is rising. European investors have begun to put cash to work, raising allocations on 12 out of 19 European sectors.
“We have seen a 25 percent rally in European stocks from the June low, but sentiment on Europe has only just turned positive. Any extension of the rally is likely to be led by sector rotation and buying of unloved, domestically exposed stocks,” said John Bilton, European investment strategist at BofA Merrill Lynch Global Research.
As Europe becomes less unloved, investors appear to be moderating their bullish view of US equities and have turned more bearish on Japan.
The proportion of asset allocators’ overweight positions in US equities has ticked down to a net 11 percent from a net 13 percent in August.
Looking ahead, investors appear to see poor value in the US. A net 58 percent identify US equities as the most overvalued globally (up from 51 percent a month ago) while a net 43 percent identify the euro zone as the most undervalued. This represents the greatest divergence between European and US valuations in the history of the survey.
While investors moderately reduced their underweight positions in Japanese equities, this month’s survey suggests sentiment is turning more bearish. A net 23 percent of asset allocators are now underweight Japanese equities, a small improvement from a net 25 percent. But a net 24 percent of investors say Japan is the region they most want to underweight – double the level expressing that view in August.
In a month when global economic sentiment continued to rise, profit expectations have continued to fall. A net 17 percent of the global panel expects the world economy to strengthen in the coming 12 months, a rise of two percentage points since August, consolidating the strong gains the previous month.
However, a net 28 percent believe corporate profits will deteriorate over the same period, up from a net 21 percent a month ago. Investors are growing impatient about low levels of investment. A growing majority – a net 59 percent – say that corporates are underinvesting, up from 54 percent in August. A net 41 percent of investors believe corporates should increase capital spending, an increase from a net 33 percent in August.
While there is evidence of some pro-cyclical rotation, European investors remain underweight in several higher-beta sectors; notably banks, basic resources, real estate and construction.
At the global level, a net 21 percent remain underweight banks this month, down 14 percentage points month-on-month. The scaling back of bank underweights was even more pronounced in Europe, albeit from a deeper underweight position. A net 25 percent of the European panel is now underweight banks, down from a net 43 percent in August.
BofA survey finds sentiment coming back toward Europe
BofA survey finds sentiment coming back toward Europe
First EU–Saudi roundtable on critical raw materials reflects shared policy commitment
RIYADH: The EU–Saudi Arabia Business and Investment Dialogue on Advancing Critical Raw Materials Value Chains, held in Riyadh as part of the Future Minerals Forum, brought together senior policymakers, industry leaders, and investors to advance strategic cooperation across critical raw materials value chains.
Organized under a Team Europe approach by the EU–GCC Cooperation on Green Transition Project, in coordination with the EU Delegation to Saudi Arabia, the European Chamber of Commerce in the Kingdom and in close cooperation with FMF, the dialogue provided a high-level platform to explore European actions under the EU Critical Raw Materials Act and ResourceEU alongside the Kingdom’s aspirations for minerals, industrial, and investment priorities.
This is in line with Saudi Vision 2030 and broader regional ambitions across the GCC, MENA, and Africa.
ResourceEU is the EU’s new strategic action plan, launched in late 2025, to secure a reliable supply of critical raw materials like lithium, rare earths, and cobalt, reducing dependency on single suppliers, such as China, by boosting domestic extraction, processing, recycling, stockpiling, and strategic partnerships with resource-rich nations.
The first ever EU–Saudi roundtable on critical raw materials was opened by the bloc’s Ambassador to the Kingdom, Christophe Farnaud, together with Saudi Deputy Minister for Mining Development Turki Al-Babtain, turning policy alignment into concrete cooperation.
Farnaud underlined the central role of international cooperation in the implementation of the EU’s critical raw materials policy framework.
“As the European Union advances the implementation of its Critical Raw Materials policy, international cooperation is indispensable to building secure, diversified, and sustainable value chains. Saudi Arabia is a key partner in this effort. This dialogue reflects our shared commitment to translate policy alignment into concrete business and investment cooperation that supports the green and digital transitions,” said the ambassador.
Discussions focused on strengthening resilient, diversified, and responsible CRM supply chains that are essential to the green and digital transitions.
Participants explored concrete opportunities for EU–Saudi cooperation across the full value chain, including exploration, mining, and processing and refining, as well as recycling, downstream manufacturing, and the mobilization of private investment and sustainable finance, underpinned by high environmental, social, and governance standards.
From the Saudi side, the dialogue was framed as a key contribution to the Kingdom’s industrial transformation and long-term economic diversification agenda under Vision 2030, with a strong focus on responsible resource development and global market integration.
“Developing globally competitive mineral hubs and sustainable value chains is a central pillar of Saudi Vision 2030 and the Kingdom’s industrial transformation. Our engagement with the European Union through this dialogue to strengthen upstream and downstream integration, attract high-quality investment, and advance responsible mining and processing. Enhanced cooperation with the EU, capitalizing on the demand dynamics of the EU Critical Raw Materials Act, will be key to delivering long-term value for both sides,” said Al-Babtain.
Valere Moutarlier, deputy director-general for European industry decarbonization, and directorate-general for the internal market, industry, entrepreneurship and SMEs at European Commission, said the EU Critical Raw Materials Act and ResourceEU provided a clear framework to strengthen Europe’s resilience while deepening its cooperation with international partners.
“Cooperation with Saudi Arabia is essential to advancing secure, sustainable, and diversified critical raw materials value chains. Dialogues such as this play a key role in translating policy ambitions into concrete industrial and investment cooperation,” she added.
