European equity funds are rotating from France into the UK as investors respond to weaker French growth forecasts, a worsening fiscal backdrop and political uncertainty, HSBC said. The UK recorded Europe’s largest investment inflows last month among funds tracked by the bank, while France saw the largest outflows. HSBC cut France to underweight and said the FTSE 250 could perform particularly well as the UK growth outlook improves. The FTSE 100 has risen 5% this year, while France’s CAC 40 has fallen 3.7%. The UK economy grew 0.6% in the first quarter and 0.5% in the second, compared with French contraction of 0.2% in the first quarter of 2026 followed by stagnation. France’s unemployment rate is 8.3%, versus 4.9% in the UK. The OECD downgraded France’s growth outlook while upgrading its 2026 forecast for the UK. France is also facing elevated borrowing costs, a budget deficit targeted at 5% of GDP and uncertainty ahead of the 2027 presidential election. HSBC nevertheless raised its year-end STOXX 600 target to 680 and said European equity funds remain resilient overall, with technology offering the strongest projected 2027 earnings growth at 27%.