Global equity funds see outflows amid uncertainty over rate cut timing

April 5 – Investors trimmed their holdings in global equity funds in the week ending April 3 as they weighed the possibility of the Federal Reserve delivering fewer interest rate cuts than expected, amid strong US economic reports and solid labor demand.

LSEG data showed investors shed a net USD 2.08 billion worth of global equity funds during the week, marking the first weekly net outflow since Feb. 21.

This cautious stance came as the ISM report indicated US manufacturing growth in March, the first since September 2022, lessening the likelihood of imminent rate cuts. Further bolstering this view was the rise in US job openings in February.

By region, investors offloaded US and European equity funds of USD 3.28 billion and USD 1.63 billion, respectively. Asian funds still witnessed about USD 2.02 billion worth of net purchases.

The healthcare sector suffered net selling for a fourth successive week as it lost about USD 1 billion in outflows. Consumer staples and utilities also saw USD 239 million and USD 225 million worth of outflows, respectively.

Global investors, meanwhile, acquired a net USD 14.71 billion worth of bond funds, posting the largest weekly net purchase in four weeks.

Medium-term US dollar bonds saw a significant uptick in demand as they secured about USD 4.55 billion, the most in a week since May 3, 2023. Corporate and government debt funds meanwhile, had USD 2.36 billion and USD 776 million worth of net purchases, respectively.

Money market funds attracted significant capital during the week, valuing about USD 104.32 billion on a net basis, the largest amount since January 3.

Among commodities, investors purchased precious metal funds worth USD 663 million, a turnaround from USD 586 million in net disposals in the prior week. Conversely, energy funds had USD 52 million in net outgo.

Data covering 29,583 emerging market funds showed bond funds accumulated about USD 1.42 billion in net purchases, the highest since early December 2023. Equity funds, however, faced an outflow, amounting to a net USD 851 million.

(Reporting by Gaurav Dogra and Patturaja Murugaboopathy in Bengaluru)