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

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

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

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

U.S. data signalling 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 U.S. rate cut in the next week’s meeting.

Investors sold $7.82 billion worth of U.S. equity funds last week following $11.54 billion in net sales the prior week. Conversely, Asian and European funds drew inflows of $2.91 billion and $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 $1.97 billion outflow in the week to Sep. 11, the largest since November 2023. Meanwhile, investors withdrew $1.53 billion from financials and allocated $1.12 billion and $878 million to consumer staples and utilities, respectively.

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

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

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

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