U.S. fund investors taper Euro stock buying ahead of French vote

By Trevor Hunnicutt| NEW YORK

Investors stocked up on safe-haven U.S.-based gold and bond funds ahead of France’s closely watched presidential election, while trimming purchases of European stock funds, Lipper data showed on Thursday.

Non-U.S. stock funds attracted $1.5 billion in net cash for the fifth straight week, according to Thomson Reuters’ Lipper research unit, after pulling in $3.8 billion the prior week.

U.S.-listed iShares MSCI France ETF posted $57 million in withdrawals on Wednesday, according to the fund’s manager BlackRock Inc. The price rose 1.8 percent on Thursday.

Lipper’s most recent data covers the seven days through Wednesday, before a French policeman was shot dead and two others were wounded in a shooting in central Paris on Thursday night.

French voters go to the polls on Sunday in the country’s most tightly contested presidential election in living memory.

“We’ve learned that polls are not perfect indicators of reality, and I think you have to be concerned. I think there is a whole series of outcomes that are dangerous to the Eurozone – to the future of the Eurozone,” said Rick Rieder, global chief investment officer of fixed income at BlackRock, the world’s largest asset manager.

“We’ve reduced some risk into it.”

Precious-metals commodities funds offered in the United States had a net inflow of $830 million, the most in two months, while taxable-bond funds attracted $1.5 billion.

U.S.-based European stock funds attracted just $107 million, about a quarter of what they pulled in the week prior, according to Lipper.

Those European equity funds have netted cash in all but two weeks this year as well as in each of the last eight weeks as foreign investors see potential bargains and early signs of economic growth on the continent.

Polls show anti-European Union candidate Marine Le Pen as a likely frontrunner for one of two places in France’s May 7 run-off. Le Pen wants to dump the euro currency, which could shake markets.

Yet two surprise elections last year – the British vote to leave the European Union in a process called “Brexit,” and the U.S. election of President Donald Trump – have done less damage to markets than some had predicted.

“I think that the muscle memory of Brexit and the huge rally after Trump’s surprising win has investors thinking that they won’t be overly panicked by events. You might not like the outcome, per se, but it’s the ‘uncertainty factor’ that is removed,” said Greg Peters, who runs the Prudential Total Return Bond Fund.

(Reporting by Trevor Hunnicutt; Editing by Jennifer Ablan and Richard Chang)