| LONDON, April 21
LONDON, April 21 The $1 trillion of financial
assets that central banks in Europe and Japan have bought so far
this year is the best explanation for the gains seen in global
stocks and bonds despite lingering political risks, Bank of
America Merrill Lynch said on Friday.
If the current pace of central bank buying, dubbed the
"liquidity supernova" by BAML, continues through the year, 2017
would record their largest financial asset purchases in a
decade, the broker said in its weekly report on investment
Shorter-term investor flows pointed to a mild "risk-off"
with $3.8 billion pumped into bond funds and $0.6 billion pulled
from equities over the past week, BAML said.
A run of disappointing U.S. economic data, questions about
whether the Trump administration can push through tax cuts and
uncertainty around the French election have dented some of the
enthusiasm for risky assets in recent weeks.
Global stocks, which hit a record high last
month are down about 1.3 percent from those peaks as investors
locked in some profits.
U.S. stocks, which have led gains since last summer, have
now seen outflows in four of the last five weeks, BAML said,
adding that another $2.6 billion was pulled out in the latest
The mood on European stocks, particularly among global
investors, remains bright, the data showed, as relatively
attractive valuations and a better economic backdrop have so far
trumped risks related to politics.
European equity funds pulled in $0.6 billion over the past
week, their fourth straight week of inflows, BAML said.
The risk-on script on Europe would get ripped up, however,
in the "worst case outcome" if far-right candidate Marie Le Pen
and/or hard-left challenger Jean-Luc Melenchon go through to the
second round, the broker said.
If Le Pen and Melenchon do go through, BAML warns of a major
risk-off in European and globally.
The latest poll showed that French centrist Emmanuel Macron
is set to come out on top in the first round on Sunday.
(Reporting by Vikram Subhedar; Editing by Alison Williams)