Global equity funds remained out of favor in the seven days ended September 7 as a strong report from the US services industry fueled concerns that the Federal Reserve would raise interest rates further in a bid to tame inflation.
Some investors had expected that the Fed might taper rate hikes to stave off an economic slowdown, which in turn would boost risky assets.
Another bearish factor for equities was a deepening of Europe’s energy crisis after Russia said one of its key gas supply pipelines to the West would remain closed indefinitely, stoking renewed fears of shortages.
Investors sold a net $23.99 billion in global equity funds after dumping $31.73 billion in funds the previous week, data from Refinitiv Lipper showed.
GRAPH: Fund Flows: Global Equities, Bonds and Money Market https://fingfx.thomsonreuters.com/gfx/mkt/zjvqkrnazvx/Fund%20flows-%20Global%20equities%20bonds%20and%20money%20market.jpg
US and European equity funds saw net outflows of $14.83 billion and $10.14 billion, respectively, while Asia saw inflows of $1.23 billion.
Alejandra Grindal, chief economist at Ned Davis Research, said high inflation and tighter monetary policy were impacting global equities, adding that the energy crisis posed a much bigger near-term risk for the euro zone.
Financials and consumer discretionary funds posted net sales of $1.36 billion and $810 million, respectively, after both saw inflows the week before. Tech also faced $1.03 billion worth of withdrawals in a third week of sales.
GRAPH: Fund Flows: Global Equity Sector Funds https://fingfx.thomsonreuters.com/gfx/mkt/xmvjoabjmpr/Fund%20flows-%20Global%20equity%20sector%20funds.jpg
Bond funds also remained unpopular for the third straight week, posting $2.51 billion in net sales, despite outflows falling 70% from the previous week.
Investors trimmed their positions in high yield and short- and intermediate-term bond funds by $4.03 billion and $947 million, respectively, but weekly government bond fund purchases rose to an eight-week high of $5.43 billion -Dollar.
GRAPH: Global bond fund flows for the week ended September 7 https://fingfx.thomsonreuters.com/gfx/mkt/gkvlgnbjrpb/Global%20bond%20fund%20flows%20in%20the%20week%20ended%20Sept%207.jpg
Meanwhile, money market funds saw $934 million worth of inflows after four consecutive weeks of outflows.
Energy funds received $138 million on their first weekly inflow in four weeks, but precious metals fund sales lasted an 11th week, totaling $455 million.
An analysis of 24,506 emerging market funds found both stocks and bonds suffered a third weekly outflow, totaling $3.37 billion and $738 million, respectively.
GRAPH: Fund Flows: EM equities and bonds https://fingfx.thomsonreuters.com/gfx/mkt/myvmnzbjzpr/Fund%20flows-%20EM%20equities%20and%20bonds.jpg
(Reporting by Gaurav Dogra and Patturaja Murugaboopathy in Bengaluru; Editing by Alexander Smith)
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