A few weeks ago, Europe fell in line with the rest of the equity-investing world.

Growth expectations were starting to build; Asia was seen recovering, and the U.S. showed no signs of finally tuckering out. Even the

European Central Bank

kicked in, cutting its base interest rate by a half of a percentage point.

German investors didn't break rank. They rushed to snap up shares of fusty companies like machinery maker

MAN AG

, which surged as much as 25%, and engineers

Linde AG

, which rose 13%.

But while the shift to cyclicals continues to capture headlines in the U.S., German fund managers -- worried about a market that has pushed higher everything from raw materials makers to engineering concerns -- are now starting to cycle out.

Part of the problem, fund managers say, is that interest in the issues didn't gradually build. Rather, encouraged by interest in the sector overseas, investors all dove in at once.

"Suddenly there was buying across the sector," says Hans-Joachim Konig, a fund manager specializing in cyclical stocks at

Union Investment Gesellschaft mbH

in Frankfurt, of the euphoria earlier this month, although he stayed out of the pool himself. "Nobody really paid much attention to the quality of the company or which part of the cycle it belonged to."

Konig's prudence, which has kept him out of late-stage companies like the machinery makers, was rewarded earlier this week, when the German government said the economy would likely grow by only 1.5% in 1999.

Part of Germany's weakness is its reliance on exports, which were humbled as Asia imploded nearly two years ago. That downturn was exacerbated when Russia, which buys about 2% of Germany's exports, devalued the ruble, bringing down eastern Europe, and the demand it generated, with it.

Falling overseas demand still plagues German machinery makers. An illustration:

VDMA

, the big industry group, reported on Wednesday that orders for machinery equipment slid 11% in March. Almost all of that was caused by a drop in foreign orders.

Some suggest the flow of money into cyclicals may soon change course.

"At the beginning of the year it was oversold, now it's gone too far in the other direction," says Uta Speidel, who helps manage energy and raw material-focused funds for

Deutscher Investment Trust Gesellschaft fur Wertpapieranlagen mbH

, a unit of

Dresdner Bank

.

While the

momentum behind European cyclicals may continue to build, Germany's stubborn economy still has the potential to frustrate investors. At least if it can't get into the cycle.