European equity funds just had their biggest week in more than two years, taking in $2.3 billion in new assets under management (AUM).

Curiously, in the same week, U.S. equity funds – which have seen robust expansion of AUM all year, including recent notable inflows of $2 billion a day at the beginning of July – got hit with their first outflows in seven weeks as investors redeemed $1.9 billion.

"Largest weekly inflows to European equity funds in more than 2 years ($2.3bn) confirms Europe back in fashion," says BofA Merrill Lynch chief investment strategist Michael Hartnett.

Was this week just a blip, or could it be foretelling of a larger trend?

On Wednesday, France and Germany reported better-than-expected GDP data, officially lifting the eurozone out of a two-year recession. To be sure, the euro area's economic woes are far from over, as unemployment rates in many countries remain at or near all-time highs.

Investors may be warming to the story, though.

Last week, Oppenheimer chief market strategist John Stoltzfus passed along a related observation: "Stateside investors are beginning to consider investments in Europe and elsewhere ex-U.S. for diversification once again as multiples expand stateside and hints that conditions are beginning to improve outside of the U.S., particularly in the developed European markets, emanate."

Below is a breakdown of this week's fund flows, via Hartnett:

Asset Class Flows

Equities: modest $1.3bn inflows (7 straight weeks) (all via LO funds)

Bonds: $1.4bn outflows ($60bn outflows since Jun'13)

Commodities: tiny $66mn outflows (record 27 straight weeks)

Equity Flows

Largest weekly inflows to European equity funds in more than 2 years ($2.3bn)

$0.8bn outflows from EM equity funds; note divergence between $1.5bn Frontier market inflows and $2.1bn Emerging market outflows YTD

$1.9bn outflows from US (first outflows in 7 weeks)

Solid $0.7bn into Japan (inflows in 29 out of past 30 weeks)

By sector, Energy funds record $0.7bn inflows (largest in 6 weeks) vs $0.6bn out of Financials funds (largest in 8 weeks)

Fixed Income Flows

60 straight weeks of inflows to floating-rate debt ($1.6bn)

18 straight weeks of outflows from TIPS ($0.2bn)

12 straight weeks of outflows from EM debt ($0.8bn)

12 straight weeks of outflows from Munis ($1.4bn)

Small outflows IG bond funds ($0.4bn); HY funds eke out tiny inflows ($45mn) 

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