Investors turn net sellers of global equity funds on recession fears

(Reuters) – Rising concerns of a recession following weaker economic data and expectations the Fed will keep hiking rates to tame inflation led to outflows from global equity funds in the week ended April 19.

Data from Refinitiv Lipper showed investors sold equity funds worth $2.25 billion in the week, compared with a $215 million net purchase the previous week.

Fund flows: Global equities, bonds and money markets,

U.S. retail sales slowed in March as higher interest rates dissuaded consumers from buying big-ticket items while manufacturing output also dropped 0.5% last month.

The U.S. Leading Economic Index, a gauge of future economic activity, dropped to its lowest level since November 2020 overnight, signalling a recession starting mid-2023.

European and U.S. equity funds suffered outflows of $1.64 billion and $1.43 billion, respectively, while Asia drew inflows of $1.1 billion.

Rate hike expectations also affected the bond market, as investors turned net sellers of global bond funds for the first time in five weeks.

Global bond fund flows in the week ended April 19,

The U.S. bond funds witnessed outflows of $3.08 billion, but European and Asian bond funds received inflows of $760 million and $470 million worth, respectively.

Investors withdrew $1.68 billion from government bond funds in their first weekly net selling in 10 weeks. However, global high-yield bond funds drew $2.69 billion of inflows after $182 million of outflows in the previous week.

Meanwhile, investors exited $89.35 billion worth of global money market funds after a seven-week buying spree.

Fund flows: Global equity sectors Fund flows: Global equity sectors,

Among commodities, precious metal funds recorded their first weekly outflow in six weeks, amounting to about $120 million, while energy funds faced $170 million of withdrawals.

Data for 23,920 emerging market funds showed investors purchased $384 million worth of equity funds in a fourth week of net buying while securing $513 million worth of bond funds.

Fund flows: EM equities and bonds Fund flows: EM equities and bonds,