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Strategies & Market Trends : rat's nest -- Ignore unavailable to you. Want to Upgrade?

To: AugustWest who wrote (666)	10/31/2003 7:21:23 AM
From: AugustWest	Respond to of 844

(REUTERS) POLL-European funds dump US Treasuries for euro debt By Tom Burroughes LONDON, Oct 31 (Reuters) - European funds have cut U.S. Treasuries and switched to euro zone bonds on a mounting belief that U.S. interest rates could rise amid upbeat economic prospects, a monthly Reuters poll showed on Friday. A survey of 11 asset managers polled between October 23 and 30 showed they expected to remain bearish on U.S. Treasuries over the coming 12 months. "Everybody is expecting that a U.S. rate hike would be more likely than it has been," Martina Koscksch, senior portfolio manager at Cominvest in Frankfurt, told Reuters. Managers are overweight global equities over the next 12 months, though they expect to take a less aggressive stance over that period and are less upbeat than they were in September. The poll's findings were collected on the eve of surprisingly punchy U.S. data on Thursday, which suggested a robust economic recovery was underway. The U.S. Commerce Department said gross domestic product grew at a 7.2 percent annual rate in the third quarter, the fastest rate in more than 19 years, and beating analysts' expectations. "We are in a pattern which is favourable for equity markets while bond markets are going to be in for a bumpy ride," said Michala Marcussen, associate director of strategy and economic research at SG Asset Management. Marcussen said a question mark for funds was knowing how sustainable a global economic recovery could be. The U.S. authorities' fiscal and monetary stimulus over the past year or so was the biggest of its kind since World War Two and not a weapon that could be readily used again, she said. Fund managers expect to remain overweight equities when compared to their market benchmarks over the coming 12 months, and are underweight bonds for the next three months but expect to reach a neutral stance by a year's time. Managers of balanced multi-asset funds made few major changes to their splits of bonds, stocks, cash and alternative assets such as hedge funds and private equity. Looking ahead, they are neutral of property over the year, and turning increasingly negative towards alternative assets. Funds are slightly negative to cash over the following 12 months, leaving little spare liquidity to pump into other markets. SELLING U.S. DEBT The poll showed managers are giving U.S. Treasuries the cold shoulder over the coming 12 months, on expectations the U.S. Federal Reserve may be edging closer to hiking interest rates, which are at 45-year lows. Managers of bond funds cut average holdings of north American debt to 24.71 percent from September's average holding of 32.69 percent, while holdings of euro zone debt rose to 50.22 percent from 45.24 percent. Equity fund heads also cut average holdings of north American stocks to 42.49 percent in October from 48.72 percent. Managers of equities were overweight euro zone debt in October, but looked to shift to underweight in a year's time. They are overweight Japanese and Asian equities, but expect to move underweight on Japan stocks in 12 months' time. Among economic sectors, equity fund managers are overweight sectors which typically fare well during an economic upturn, taking positive positions on materials, energy and IT, while remaining negative on consumer staples and utilities. ((Reporting by Tom Burroughes; editing by Gerrard Raven; +44 207 542 2647; Reuters Messaging: tom.burroughes.reuters.com@reuters.net)) REUTERS * end of story *