(Reuters) – Global investors massively cut their positions in bond and equity funds in the week ended May 18 on concerns of inflation and that rising interest rates will lead to recession.
According to Refinitiv Lipper, investors exited a net $18.57 billion worth of global bond funds, marking the biggest weekly outflow since Feb. 16.
(Graphic-Fund flows: Global equities bonds and money market: https://fingfx.thomsonreuters.com/gfx/mkt/jnvwezwdxvw/Fund%20flows-%20Global%20equities%20bonds%20and%20money%20market.jpg)
Expectations of higher interest rates to come follow comments from U.S. Federal Reserve Chairman Jerome Powell this week that the central bank will “keep pushing” to tighten U.S. monetary policy until it is clear that inflation is declining.
British inflation hit its highest annual rate since 1982 in April, while Canada reported a higher-than-expected jump.
U.S. and European bond funds witnessed net selling worth $8.41 billion and $8.14 billion respectively, while Asian funds attracted small inflows of $0.06 billion.
Global short- and medium-term bond funds saw a nineteenth subsequent week of net selling, amounting $4.62 billion, and high yield funds had outflows of $5.17 billion.
Government bond funds however, remained in demand as they lured $5.45 billion in a third straight week of net buying.
(Graphic- Global bond fund flows in the week ended May 18: https://fingfx.thomsonreuters.com/gfx/mkt/byvrjdrwxve/Global%20bond%20fund%20flows%20in%20the%20week%20ended%20May%2018.jpg)
Selling in global equity funds continued for a sixth straight week, although outflows at $6.26 billion were about 54% lower than the previous week.
Among sector funds, financials, and consumer discretionary lost $2.07 billion and $0.84 billion respectively in outflows, but utilities and healthcare gained $1.12 billion and $0.81 billion worth of inflows.
(Graphic: Fund flows: Global equity sector funds: https://fingfx.thomsonreuters.com/gfx/mkt/zgpomerxnpd/Fund%20flows-%20Global%20equity%20sector%20funds.jpg)
Investors also disposed money market funds worth $7.62 billion in a third consecutive week of net selling.
Data for commodity funds showed investors offloaded $1.57 billion worth of precious metal funds in their biggest weekly net selling in 14-months, while energy funds saw outflows of $249 million.
An analysis of 24,262 emerging market funds showed investors sold equity funds of $1.38 billion and bond funds of $4.36 billion, marking a sixth weekly outflow in a row.
(Graphic: Fund flows: EM equities and bonds: https://fingfx.thomsonreuters.com/gfx/mkt/akvezrawepr/Fund%20flows-%20EM%20equities%20and%20bonds.jpg)
(Reporting by Gaurav Dogra and Patturaja Murugaboopathy in Bengaluru; editing by Barbara Lewis)