Fund flows to European funds continue to reflect the eurozone crisis saga and its attendant market turbulence, according to the latest data from investment research firm Morningstar.

The liquidity-fuelled market rally of the first quarter of 2012 lifted investor confidence and resulted in fund inflows, the firm says. But in the second quarter, instability in Europe and bad news from the US and China dominated the picture.

Equity funds were the hardest hit; after inflows of €3 billion ($3.7 billion) in the first quarter, European investors withdrew more than €21 billion in the second quarter, with €7.5 billion of those redemptions occurring in June. The Asia ex-Japan equity category saw outflows of €2 billion in the second quarter after attracting roughly €1.2 billion in the first three months of the year.

Demand for bond funds stays high, with fixed-income fund inflows of €9 billion in June to reach more than €21 billion for the second quarter. Europe’s most popular bond fund for the quarter was Alliance Bernstein American Income Portfolio, which enjoyed inflows of €2.1 billion.