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European stocks in, U.S. equities out: BAML survey

LONDON, April 18 (Reuters) - Global investors' enthusiasm for European stocks continues to surge, the latest Bank of America Merrill Lynch (BAML) survey of portfolio managers showed on Tuesday, with bank noting that the swing of funds into the region and away from the United States was one of the largest since 1999.

Allocation to U.S. equities fell to it lowest since January 2008, BAML said, adding that investors cited rich valuations and potential delays to U.S. tax reforms as key concerns.

The so-called "Trump trade," which saw major U.S. stock indexes hit record highs and lifted bond yields on hopes that U.S. President Donald Trump would push through business-friendly reforms, has faltered in recent weeks on worries over the new administration's ability to deliver on promises.

U.S. Treasury Secretary Steven Mnuchin said the Trump administration's timetable for tax reform is set to falter following setbacks in negotiations with Congress over healthcare, the Financial Times reported on Monday.

More than 40 percent of investors surveyed do not expect tax reforms to be passed before 2018, BAML said.

In Europe, meanwhile, the mood for stocks has brightened.

The brightest earnings outlook for European firms in 7 years, a recovering banking sector and better economic data from across the region has bolstered investor appetite and drawn funds back into the region.

European stocks traded at about 15 times forward earnings compared with a multiple of 17.7 times for the United States, according to Thomson Reuters data.

The risk that European elections might lead to the disintegration of the European Union slipped sharply from last month's survey, the BAML said, though it remained the biggest "tail risk" for global investors.

Along with the euro zone, investors added to emerging markets stocks with allocations running at 5-year highs while enthusiasm for global banking stocks was at its highest ever.

More broadly, global funds held about 4.9 percent of their portfolio in cash, the survey showed. (Reporting by Vikram Subhedar Editing by Jeremy Gaunt.)

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