Over the past two years, European investors have made a substantial, but generally unrecognized, contribution to the

Dow's

ascent to 10,000.

Buyers from the Old Continent piled a hefty $72 billion into U.S. equities last year, according to

Treasury Department

data. But exactly how big is this sum?

Sizable. Last year, Americans themselves put $150 billion into funds that focus on their own stock market. While these two flows are not directly comparable, the numbers do show the strong relative presence that the European investors now have in the U.S.

Europe's love affair with U.S. stocks is relatively recent. In 1996, Europeans spent a mere $5.4 billion on U.S. equities. The feeling in Europe's financial centers was that the U.S. market was a bubble to be avoided. But when Wall Street kept climbing, Europeans realized they couldn't stay out.

In 1997, they went from being sneering skeptics to ardent pursuers -- and sank some $63 billion into U.S. equities.

"Our performance has been powered by the U.S. market," says London-based Mark Westwood, a manager on the

Johnson Fry Global Growth

fund, the top performing foreign-focused U.K. mutual fund over the past year. His fund has 35% of its assets in the U.S. and has returned 28.3% over the past 12 months in sterling terms, according to fund trackers

Trustnet

.

"European managers were being hurt by staying out of the U.S.," Westwood says. "They were scared of overvaluation, but in the end people realized they just had to get in."

But if most of the Europeans' buying was opportunistic catch-up investing, their long-term commitment to the U.S. has to be questioned. They could turn out to be a bunch of cynical gold-diggers who will dump America when it stops delivering.

Indeed, some investors' passions are starting to wane.

Big U.S. Stocks 'Pushing the Extremes'

"For the last six months, we've felt that the top blue-chips are pushing the extremes," says Mike Boxall, manager of the U.K.'s

MGM International Equity Growth

mutual fund. "We've stayed in the U.S. market, but we're not adding new money." The

S&P 500

is trading around 26.9 times 1999 earnings forecasted by

First Call

, while the P/E ratio for Europe's developed markets is 22.6, according to

Salomon Smith Barney

.

But it would be wrong to overplay the possible flightiness of the Europeans. While Boxall is uncomfortable with many of the blue-chips, he claims to have identified many U.S. stocks that look attractively valued. The only problem is that they've been left standing by the big-cap companies, he says. "I can find plenty of good value stocks, but I'm not convinced that they'll go up quickly enough," he explains. Presumably, if a broad-based rally occurred, he'd stay in the U.S.

There are even signs that some Europeans are learning to love the highest-climbing U.S. stocks -- even despite their demanding valuations.

For example, Westwood's fund has positions in

AOL

(AOL)

,

Dell

(DELL) - Get Report

and

Gap

(GPS) - Get Report

.

While he is a little queasy about the levels at which such stocks are trading, Westwood also feels that these companies dominate their fields and will continue to do so for some time. The fact remains that investors would be hard pressed to find companies like Dell,

Microsoft

(MSFT) - Get Report

or

Citigroup

(C) - Get Report

outside the U.S.

And it would be simplistic to assume that a steep decline in U.S. equities would prompt the Europeans to make a panicky and permanent exodus. In fact, they did just the opposite during the minicrash in U.S. equities in last year's third quarter. Instead of becoming net sellers of U.S. stocks during this period, they actually became dip buyers

par excellence

, sinking a net $15 billion into the market in the July-September 1998 period, when other foreign investors were big net sellers (see chart).

"It was a perfect opportunity to get in," says Westwood.