Almost a third of Continental fund managers are holding "above normal" levels of cash in their portfolio. Merrill Lynch's monthly survey, published today, showed only 15 per cent of the 65 managers polled were bullish about the UK, down from half three months ago. US equities have also fallen out of favour with a net balance of 26 per cent bearish on Wall Street compared with 1 per cent three months ago. More managers plan to reduce their exposure to the US stock market than at any since May 1995. More fund managers plan to sell UK shares than buy for the first time since September 1998.
Bryan Allworthy, Merrill Lynch's European equity strategist, said: "Fund managers are more reluctant to invest now. They are becoming more cautious. They want to wait and see of IS policymakers will raise interest rates by early autumn - especially after hearing US Fed chairman Alan Greenspan's recent warning that there may have to be a policy response to external economic growth."
Speculation that a rate rise could come as soon as this month were heightened by figures on Friday showing job creation advanced at a much faster than expected rate last month. Today's survey was carried out between 30 July and 4 August - before the most recent data.
Fund managers remain bullish about Continental Europe, Japan and the Pacific. On balance, almost three-quarters are keen on Japan, 55 per cent about Europe and 55 per cent about the Pacific Basin
t Global economic growth is forecast to accelerate in each of the five years up to 2003, led by a strong recovery in Asia, according to a report published today.