Global equity funds see fourth weekly outflow on rate hike expectations

Global equity funds continued to record outflows in the seven days to September 14 as a higher than expected reading on U.S. inflation raised bets that the Federal Reserve would remain aggressive in raising interest rates for longer. 

Some investors had expected that U.S. CPI report would show an easing in inflation in August and provide a path for the Fed to moderate its policy tightening.

Investors sold a net $13.11 billion of global equity funds after withdrawing a net $23.02 billion in the previous week, data from Refinitiv Lipper showed.

Also weighing on sentiment was the risk of a global recession due to the simultaneous interest rate increases from major central banks, including the Fed, the European Central Bank and the Bank of England, to tame persistent inflation.

U.S. and European equities funds faced outflows amounting a net $10.52 billion and $2.74 billion, respectively, but Asia obtained about $740 million in inflows.

Among sector funds, technology, communication services and financials posted outflows worth $1.15 billion, $611 million, and $350 million, respectively, but consumer staples lured $1.38 billion in inflows.

Meanwhile, net selling in bond funds eased to a four-week low of $725 million.

Outflows from high yield bond funds saw a 96-per cent decline from a week ago to $165 million, although net selling in short-and medium-term funds rose 29% to $1.48 billion.

However, government bond funds remained in demand for a third week with $4.85 billion worth of inflows.

Data showed money market funds had $17.95 billion worth of net selling after posting a weekly inflow.

In the commodities space, energy funds received a marginal $14 million in a second straight week of net buying, but precious metal funds were out of favour for a 12th week with $794 million in outgo.

An analysis of 24,516 emerging market funds showed equity funds saw $989 million worth of net selling, while bond funds lost $1.35 billion in a fourth straight week of outflows. –

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