Severe fears of a rate hike call into the third week of global equity fund outflows


Severe fears of a rate hike call into the third week of global equity fund outflows

Interest rate concerns led to third week of global equity fund outflows

Global equity funds remained unfavorable in the seven days ending September 7, as a strong report on the US service industry raised concerns that the Federal Reserve will continue to raise interest rates to tame inflation.

Some investors expected that the Federal Reserve might ease up on higher interest rates to avoid a slowdown in the economy, which in turn would boost risky assets.

Another bearish factor for stocks was the worsening energy crisis in Europe after Russia said one of its major gas supply pipelines to the West would remain closed indefinitely, sparking renewed concerns about shortages.

Data from the Refinitiv Lipper showed that investors dumped global equity funds with a net worth of $23.99 billion after shedding $31.73 billion of funds in the previous week.

Draw- Money flows- global stocks, bonds and money markets

US and European equity funds reported net outflows of $14.83 billion and $10.14 billion, respectively, while Asia recorded inflows of $1.23 billion.

Higher inflation and tighter monetary policy have had an impact on global equities, said Alejandra Grindahl, chief economist at Ned Davis Research, adding that the energy crisis presents a greater near-term risk to the eurozone.

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Financial and consumer discretionary funds saw net selling of $1.36 billion and $810 million, respectively, after both saw inflows in the previous week. Tech also faced withdrawals of $1.03 billion in the third week of the sale.

Draw- Fund Flows- Global Equity Sector Funds

Bond funds also remained unfavorable for the third consecutive week as they suffered a net sale of $2.51 billion, despite outflows down 70% from the previous week.

Investors trimmed their positions in high-yield bond funds and short- and medium-term bond funds by $4.03 billion and $947 million, respectively, but weekly purchases of government bond funds jumped to an eight-week high of $5.43 billion.

Draw- Global Bond Fund Flows for the Week Ending September 7

Meanwhile, money market funds saw $934 million in outflows after seeing outflows for four consecutive weeks.

Energy funds received $138 million in their first weekly inflow in four weeks, but the sale in precious metals funds continued for the eleventh week, totaling $455 million.

An analysis of 24,506 emerging market funds showed that both stocks and bonds experienced third weekly outflows of $3.37 billion and $738 million, respectively.

Draw- Money Flows- Stocks and Bonds in Emerging Markets