Cheap price tags on foreign-equity funds lured investors back across the ocean last week, ending a three-week period during which investors pulled out those funds.

For the week ended June 2, investors put $463 million into international, long-term stock funds, according to data from the Investment Company Institute. In the three weeks prior to that, they had taken $7.3 billion out in exodus sparked by concerns over the European debt crisis.

The turnaround mirrored a bounce in European stocks. The FTSE in London increased by 2.2% in the week ended June 2, after falling 5.6% over the prior three weeks.

Market watchers say that the influx of new money to foreign funds reflects the current psyche of average investors but that it may not be sustainable.

The shift came as investors took advantage of discounts in badly beaten down, oversold markets abroad, says Marc Pado, U.S. market strategist at Cantor Fitzgerald. May will likely mark the first month of negative flows to international long-term equity funds since March 2009.

The situation in Europe hasn t necessarily improved, says Pado, but there was bargain hunting because the euro had fallen so far and the bad news didn t seem to have the same panic effect on a daily basis.

A variety of funds benefited including Class T shares of the Asia-heavy Janus Overseas fund, which jumped 4.3% in the week ended June 2, after falling 9.2% in the three weeks prior, and institutional shares of the more Eurocentric Harbor International fund, which climbed 5.3% in the week ended June 2, after falling 10.9% the three weeks prior.

Rich Atkison, an advisor for Ameriprise Financial, says some of his clients say they are interested in taking advantage of oversold conditions. Two weeks ago people didn t want to hear international, and now people are wondering if it s time, he says. Still, none of his clients say they want to add money to positions in traditional international investments just yet, he says.

Foreign funds may also be benefitting as U.S. investors have grown more disillusioned with the economy at home, says Pado. Investors pulled a total of $1.1 billion out of domestic stock funds last week, according to the ICI.

Pado says the most recent U.S. jobs report disappointed investors who were counting on stronger signs of domestic growth. The report showed the economy added 431,000 jobs last month, well below the 500,000 economists had expected.

Bullish sentiment, or expectations that stocks will rise, fell 2.6 percentage points in the latest survey by the American Association of Individual Investors released on Thursday. Two-thirds of respondents to the survey indicated that they felt the U.S. economy would grow at a slower pace in the second half of 2010 than it did in the first half.

Investors are still searching for the optimal balance of bonds and equities to shelter their money, Pado says. Bond funds saw positive inflows of $4.2 billion in the week ended June 2.

For many investors, striking that balance is a matter of finding, the least objectionable place to hide, he says.