Global equity funds see second weekly outflow on caution over economic outlook

Global investors were net sellers of equity funds for a second successive week through Sept. 11, driven by concerns over the health of the US economy and caution about the political climate in the run-up to the US Presidential debate.

However, optimism over central banks’ rate cuts trimmed down the outflows.

According to LSEG data, investors withdrew USD 3.46 billion from global equity funds during the week, a reduction in sales volume compared to the USD 4.96 billion in net sales the prior week.

US data signaling economic slowdown sparked last week’s global equity sell-off, but world stocks rebounded over 2% this week following an ECB rate cut and prospects of a 50-basis point US rate cut in the next week’s meeting.

Investors sold USD 7.82 billion worth of US equity funds last week following USD 11.54 billion in net sales the prior week. Conversely, Asian and European funds drew inflows of USD 2.91 billion and USD 793 million, respectively.

“We prefer global equities to fixed income once again, as rate cuts are starting around the globe and joblessness is still low,” Ajay Rajadhyaksha, chairman for global research at Barclays, said in a note.

“But investors may elect to sit on the sidelines for now, awaiting clarity that will emerge from the US presidential election.”

The technology sector experienced a substantial USD 1.97 billion outflow in the week to Sep. 11, the largest since November 2023. Meanwhile, investors withdrew USD 1.53 billion from financials and allocated USD 1.12 billion and USD 878 million to consumer staples and utilities, respectively.

During the week, investors added USD 21.67 billion and USD 4.14 billion, respectively, to safer money market and government bond funds.

Global bond funds attracted USD 11.81 billion in their 38th consecutive week of inflows, with investors notably putting USD 3.12 billion into short-term funds and USD 1.5 billion into high-yield funds.

Gold and other precious metal funds retained their appeal for the fifth consecutive week with USD 472 million in net purchases, while energy funds saw an increase of USD 150 million in inflows.

Data covering 29,592 emerging market funds showed equity funds lost USD 1.05 billion in outflows for the 14th week in a row. In contrast, bond funds gained USD 567 million, marking a 12th straight week of inflow.

(Reporting by Gaurav Dogra and Patturaja Murugaboopathy in Bengaluru;
Editing by Tomasz Janowski)