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Whoosh! Global equity funds see biggest weekly outflows in 12 weeks

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(Reuters) – Global equity funds posted outflows for the eighth consecutive week in the seven days leading up to June 7, as concerns over stubbornly high inflation and sluggish economic growth prompted investors to pull back from riskier assets.

According to data from Refinitiv Lipper, investors withdrew a net $18.84 billion from global equity funds, the largest weekly net selling since March 15.

Hit by a slowdown in global demand, Chinese exports shrank much more than expected in May, while imports also declined due to sluggish domestic consumption. Factory activity also contracted in the U.S. and Europe.

In the United States, April data revealed an acceleration in core inflation along with robust consumer spending.

Although expectations for interest rate hikes in June have diminished, some investors are speculating about another interest rate increase in the second half of the year due to lingering concerns over inflationary pressures. Central banks in Australia and Canada surprised markets this week by resuming rate increases.

U.S. and European equity funds saw net disposals of $16.44 billion and $2.26 billion, respectively, while Asian funds attracted net purchases amounting to $375 million.

Global tech sector funds saw outflows of $736 million following four consecutive weeks of inflows. Additionally, investors withdrew $552 million from utilities funds but allocated $610 million into industrials.

In contrast, global money market funds recorded a net inflow of $55.91 billion, the largest weekly influx since April 5.

Global bond funds attracted inflows of $4.02 billion, continuing the trend of net buying for the twelfth consecutive week.

“With policy rates peaking and risks to the economic outlook increasing, we recommend adding exposure to bonds and locking in yields before markets begin to price in much lower interest rates,” Mark Haefele, chief investment officer of global wealth management at UBS, said in a note.

“We see attractive opportunities in high-quality fixed income given decent yields and the scope for capital gains in the event of an economic slowdown.”

Government bond funds attracted $2.21 billion, extending their weekly purchases for the seventh successive week, while high yield funds received inflows of $1.99 billion after outflows in the previous week.

Data for commodity funds showed that precious metal funds faced outflows for the second consecutive week, with a total net amount of $545 million. Energy funds saw withdrawals of $58 million.

In the case of emerging market funds, data for 23,982 funds revealed that equity funds saw outflows of $3.94 billion, the highest weekly outflow since March 2022. However, bond funds received net purchases of $448 million, breaking a six-week selling streak.

(Reporting by Gaurav Dogra and Patturaja Murugaboopathy in Bengaluru; Editing by Kim Coghill)

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