Analysis: European stocks lure global investors as rate hikes hurt U.S. more

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Global equity investors are finding financials-heavy European markets more alluring than their U.S. counterparts packed with expensive technology stocks in their rush for better returns amid growing signs of interest rates staying higher for longer.

"In a market that prefers value-style investments in a high interest-rate environment, that clearly works in Europe's favour," said Edward Stanford, head of European equity strategy at HSBC.

The European equity market saw the least outflows among major economies last week, of $100 million, while the U.S. recorded the biggest outflows, of $9.1 billion, according to Deutsche Bank. "It's been a good few months for Europe relative to the U.S., but there is more room for this trade to run over the course of 2023," said Hugh Gimber, a global market strategist at J.P. Morgan Asset Management.Even though Russia's year-old invasion of Ukraine sent the cost of natural gas and electricity to record high and pushed the region to the brink of a recession, Europe's economy is looking a lot less fragile.

The winter has been warmer than usual and the region's gas storage tanks are full. Along with billions of euros in government aid to homes and businesses, the economy has shown resilience.Greater exposure to China at a time when the United States has been trying to reduce its dependence on the world's second largest economy has also helped Europe's automakers, miners and luxury companies.

Exports from the eurozone to China account for about 3% of the region's total GDP and 3.5% of Germany's output, according to Barclays.

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