European investors flock to Britain as single currency bloc falls out of favour

The London Stock Exchange is now the first choice among European investors as sentiment towards the single currency bloc plummets.

In a major vote of confidence in Britain, a Bank of America survey found that a growing number of investors plan to buy UK-listed stocks over the next year.

In contrast, the survey of European fund managers found that the German, French, Italian and Spanish stock markets are firmly at a disadvantage.

A separate report found that economic sentiment towards the eurozone is falling at its fastest pace since the pandemic began.

Germany, the region’s largest economy, suffered its worst decline in two years, according to the ZEW economic research institute.

“The economic outlook in Germany is crumbling,” said ZEW President Achim Wambach, while Robin Winkler, chief German economist at Deutsche Bank, said optimism about a recovery in the country had “completely evaporated.”

The shift in sentiment comes amid political turmoil in France and growing fears of a recession in Germany.

Tomasz Wieladek, chief European economist at asset manager T Rowe Price, said there was a “real risk” that output in Germany would decline this year and warned the country could become trapped in a “self-fulfilling circle where weaker expectations lead to weaker growth”.

Meanwhile, Panmure Liberum chief economist Simon French said: “People are starting to realise how cheap the UK is and how much latent growth is available if we have a period of stability.”

The Bank of America survey found that the proportion of investors planning to be “overweight” in UK stocks over the next 12 months rose to more than 30 percent on net this month from less than 10 percent in July.

The Swiss stock market also posted a positive rating, but sentiment towards Italy, France and Spain was negative with more than a net 30 percent of investors saying they would be “underweight” German stocks.

“The UK and Switzerland are the preferred stock markets in Europe, while Germany has become the least preferred,” the Bank of America report said.

This is a dramatic change from 18 months ago, when Bank of America ranked UK stocks as the most hated in the world.

• Greek utility Metlen Energy and Metals plans to list on the London Stock Exchange from the first quarter of 2025, according to Bloomberg. The £4 billion company is already listed in Athens, but wants to list its shares in London as well.