The latest Merrill Lynch/ Gallup survey also found UK managers were optimistic about the euro, with 45 per cent expecting it to be the strongest major currency on a year's view.
Trevor Greetham, global strategist at Merrill Lynch said the "messy political compromise" over the presidency of the European Central Bank had made it more fashionable to say the euro would be a weak currency. However, relative interest rates also played a major part in a currency's strength, he said. "If interest rates in Europe rise in 1999, then the euro could prove stronger than many expect, especially against the pound,"
The survey found only 9 per cent of UK managers thought sterling would be the strongest currency over a year's view, down from 30 per cent last month.
Buying and selling patterns of UK fund managers support the view that the economy is slowing down. Fund managers are strong buyers of gilts - which often do well in a slower economy - and have turned net sellers of institutional property for the first time in more than two years. "Fund managers tend to sell property as the economic cycle turns downwards", commented Merrill Lynch.
Eighty-four per cent of UK fund managers believe sterling will join the single currency, with most expecting entry in 2002 or 2003. However, a significant minority - 33 per cent - believe joining Emu could harm the UK's economic interests.
UK fund managers are extremely pessimistic about prospects for the Asian economies, with UK support for Japanese stocks hitting its lowest level since the Merrill Lynch survey began in 1990. However, Japanese fund managers are increasingly optimistic about their country's economic prospects.Reuse content