European equity ETFs have staged a remarkable comeback after more than a decade in the shadows, driven by a convergence of fiscal and monetary policy support and investors shifting away from the US amid tariff disruption.
In February alone, Eurozone and Europe equity ETFs saw €5.6bn combined inflows, more than doubling January’s notable take of €2.6bn.
The Amundi Stoxx Europe 600 UCITS ETF (MEUDN) has raked in inflows of €1.2bn so far this year, according to data from Trackinsight.
Meanwhile, DAX ETFs have also been enjoying even more handsome inflows. The Xtrackers DAX UCITS ETF (DBXD) has pulled in €708m year-to date, while the iShares Core DAX UCITS ETF (DAXEX) has seen €574m in the same time period.
The inflows follow radical fiscal policy shifts, with the EU pledging €800bn to its 'rearmament plan' and the German parliament passing additional spending on infrastructure and decarbonisation projects.
These public spending pledges coincide with an additional 25 basis point rate cut by the European Central Bank (ECB) effective from 12 March.
Europe’s gains are further aided by a correction in high valuations for US stocks and ongoing geopolitical uncertainty.
According to FTSE Russell’s quarterly Asset Allocation Insights report, the FTSE Developed Europe ex UK index delivering its best run of relative performance against the US since 2001.
At the same time, investors have been pulling away from US stocks following their late 2024 peak. A recent Bank of America survey revealed a net 40 percentage point sentiment shift by fund managers - to 13% underweight from 27% overweight at the previous survey.
In addition, US equities saw the first three-month losses since October 2023, according FTSE Russell’s quarterly Asset Allocation Insights report.
