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Hedge funds ditch European stocks in favour of US and Japan holdings

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Hedge funds sold European equities last week to invest in stocks in the United States and Japan on the back of strong economic data boosting equity markets in both countries, according to a report by Reuters, citing client notes from JP Morgan, Morgan Stanley and Goldman Sachs.

A strong US jobs report and news that an agreement had been reached to avert a US debt ceiling crisis saw the S&P 500 Index jump to its highest since last August on Friday, while investors betting on the Bank of Japan will retain its ultra-loose policy, pushed the Nikkei to a 33-year high on Monday, its biggest daily gain since 18 Jan. 

The report cites a JP Morgan client note as revealing that Commodity Trading Advisors (CTAs) rotated out of European and Hong Kong stocks and have moved into the United States and Japan. While funds have taken the largest bullish position in Japanese stocks seen in about two years, long, or bullish bets, on UK stocks were “trimmed the most in May,” according to the note.

A Goldman Sachs client note meanwhile, revealed that hedge funds’ net buying in North American stocks reached the highest level the company had seen in about five months, led by investments in information technology, consumer staples and health care.

Hedge funds also bought shares of North American financial companies, health care, industrials and consumer-related sectors, according to a Morgan Stanley note.   

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