US funds dash to safety on Italian crisis and trade fears

04 Jun, 2018

US funds increased recommendations for bond holdings to a more than two-year high in May and cut equities to the lowest since October, citing the political crisis in Italy and rising risks of a trade war, a Reuters poll showed.
Stocks, the euro and Italian bonds were hit this week on concerns a eurosceptic government in Italy could threaten Europe's hard-won financial stability over recent years. The benchmark 10-year US Treasury yield fell by the most in one day in nearly two years on Tuesday, while two-year note yields had their biggest daily spill in more than nine years.
That has drawn the attention of global fund managers as well as short-term traders. The monthly survey of 12 US-based asset managers taken May 15-31 showed global bond allocations accounted for an average 35.8 percent, up from 34.9 percent the previous month, and the highest since February 2016.
Stock allocations were cut to 56.9 percent, down from a 4-1/2-year high of 57.9 percent in April. The remainder was spread among cash, property and alternative investments.
"The situation in Europe looks very uncertain and unless there is absolute clarity on what happens in Italy, it is best to shelter into Treasuries," said a fund manager at a very large US investment firm.

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