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Investors fearing a troubled U.S. economy cut their holdings of American equities this month to 2008 levels. According to a Bloomberg report, a BofA Merrill Lynch Global Research survey showed 14% of respondents were “underweight” U.S. stocks, compared with 7% who were “overweight” in July.

A total of 187 fund managers participated in the survey conducted between August 6 and August 12, and the following facts were revealed:

• 5% expect stronger global growth in the next 12 months, compared with 42% three months ago • 78% don’t expect another recession • Investors favored shares in emerging markets and raised their holdings with a net 38% now overweight, up from 34% in July • A net 2% are underweight U.K. equities • Japan replaced the U.K. as the least favored region with a net 27% underweight, and 62% of respondents said the yen was overvalued

– Suzanne Sharma

• • •

U.S. manufacturing posts big gains

New government data offered a mixed picture of the economic recovery Tuesday as U.S. manufacturing activity grew in July at the fastest pace in nearly a year while the outlook for the housing market remained dim.

Auto plants stayed open when they normally close for summer renovations and businesses replaced worn-out equipment. That helped boost factory output 1.1% — the biggest increase since August 2009.

Overall, output at the U.S. factories, mines and utilities rose 1.0% last month, the U.S. Federal Reserve reported. That followed a decline of 0.1% in June, the first drop in more than a year.

Construction of new homes and apartments rose 1.7% last month, the U.S. Commerce Department said. But the gains were driven by a 32.6% surge in apartment and condominium construction, a small fraction of the market.

Single-family home construction, which represented nearly 80% of the market, fell 4.2%. And requests for building permits, considered a good sign of future activity, slid 3.1%.

Separately, the U.S. Labour Department said wholesale prices rose last month on higher costs for food, cars and light trucks. Excluding volatile food and energy costs, so-called “core” producer prices rose 0.3% in July, the ninth straight increase. Core prices have risen 1.5% in the past year, a sign that inflation remains tame.

The recovery has weakened in recent months. Consumers are spending less and saving more. Businesses are hiring fewer workers. The unemployment rate for July was 9.5% and economists expect it to stay at that level for the rest of the year.

Manufacturing has been the strongest sector since the recession ended, growing in 11 of the last 12 months.

– The Associated Press

(08/17/10)