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

By Thomson Reuters Apr 26, 2024 | 6:46 AM

(Reuters) – 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 U.S. inflation readings.

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

U.S. equity funds experienced outflows of $1.2 billion, while European equity funds saw $6.3 billion leave during the week. Conversely, Asian markets, primarily driven by Japanese equity funds, recorded inflows of $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 U.S. rate outlook.

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

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

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

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

Data covering 29,598 emerging market funds (EM) showed a net

outflow of $782 million from bond funds, which was their second consecutive weekly outflow. EM equity funds saw an outflow of $1.6 billion during the week.

(Reporting By Patturaja Murugaboopathy; Editing by Tasim Zahid)