Global equity funds face fourth week of outflows amid dampened Fed rate cut hopes

Global equity funds recorded outflows for the fourth consecutive week as of April 24, affected by diminishing hopes of rapid Federal Reserve rate cuts this year amid a series of higher-than-expected US inflation readings.

Investors pulled out USD 2.7 billion worth of global equity funds during the week, which was much less than the outflow of USD 23 billion in the previous week.

US equity funds experienced outflows of USD 1.2 billion, while European equity funds saw USD 6.3 billion leave during the week. Conversely, Asian markets, primarily driven by Japanese equity funds, recorded inflows of USD 5.1 billion.

Recent inflation reports surpassed forecasts and tempered market expectations for Federal Reserve rate cuts. The markets now see a 70% likelihood of a cut in September — down from earlier projections of six cuts this year.

Global stocks were heading towards their worst month since September on Friday, with investors cautious ahead of the release of March’s core PCE price index data later in the day for further clues on the US rate outlook.

Among equity sector funds, tech sector funds experienced outflows of approximately USD 770 million during the week, while consumer staples and healthcare funds saw outflows of USD 339 million and USD 275 million, respectively. Conversely, energy and industrial sector funds recorded inflows of about USD 544 million and USD 588 million, respectively.

Meanwhile, global bond funds secured inflows of USD 2.17 billion, significantly higher than the USD 820 million recorded in the previous week.

Government bond funds drew USD 781 million, high-yield bond funds received USD 647 million, and corporate bond funds attracted USD 2.3 billion.

Among commodities, precious metal funds attracted an inflow of USD 205 million, reversing outflows from the previous two weeks, while energy funds experienced a modest outflow of USD 35 million.

Data covering 29,598 emerging market funds (EM) showed a net outflow of USD 782 million from bond funds, which was their second consecutive weekly outflow. EM equity funds saw an outflow of USD 1.6 billion during the week.

(Reporting By Patturaja Murugaboopathy; Editing by Tasim Zahid)