Investors worldwide are leaning away from the US and towards eurozone equities, according to new research by Merrill Lynch.

As nervousness builds around the US Federal Reserve's anticipated rate hike, investor attitudes towards European equities have reached a new high, according to Bank of America Merrill Lynch's monthly fund manager survey.

Investors are flocking to Europe – a net 63 per cent of fund managers surveyed deemed it the region they would most like to overweight in the coming year. The figure is up significantly from the 18 per cent taking the same stance in January and a record-high since the question was first asked in 2001.

Amid expectations that the Fed's first rate increase will be sooner rather than later, a net 19 per cent of global asset allocators are now underweight US equities, a stark contrast from the 6 per cent in the overweight camp last month and the largest underweight recorded in seven years. Jitters around the knock-on effects of raised interest rates in the US were all the more evident by the one in five respondents who believe US equities to be overvalued. But sentiment in Europe was on the upswing.

The findings of the survey echo other reports suggesting that the weaker euro - heading towards parity against the dollar - and expectations of continued loose European monetary policy are seen as positive for equities. Recent figures from TrimTabs Investment Research, for example, show that US investors have piled into European equity exchange-traded funds, with these structures pulling in $9.7 billion since the middle of January – equating to 21.1 per cent of all such assets in these European ETFs.

“Investor consensus suggests that the strong dollar will act as a positive rather than a negative for the global economy and markets,” said the chief investment strategist at BofA Merrill Lynch Global Research, Michael Hartnett.

In March, investors within Europe have been bulking up their allocations towards financial services. Those overweighting banks climbed to a net 22 per cent, compared to the 26 per cent underweight in February. Their bullishness is backed by a belief held by 38 per cent of respondents that Europe will bring double-digit earnings growth in the next 12 months. This is up notably from the mere net 3 per cent last month and leaps ahead of the -43 per cent holding the same view in January.

“Bullishness towards European stocks has reached uncharted territory. Demand for financials highlights confidence in domestic growth, while belief in European exporters is building on gains seen last month,” said European equity and quantitative strategist Manish Kabra.

Elsewhere, as default threats hang over China, investors are keeping a cautious eye on the country's debt levels – those ranking it their greatest risk was up 5 per cent from last month to 19 per cent in March.

The survey deduced its results from 207 panelists with $565 billion of assets under management and fieldwork was conducted from 6 to 12 March.