LONDON (Reuters) – Global buyers pulled more money out of European and rising markets prior to now week, opting as an alternative for U.S. shares, as strong financial progress inspired a sixth straight week of inflows, Bank of America Merrill Lynch stated on Friday.
The financial institution’s knowledge, which tracks fund flows from Wednesday to Wednesday, references a interval when buyers braced for the U.S. Federal Reserve’s second rate of interest rise of 2018 and awaited alerts from the European Central Bank on its stimulus exit path. The ECB stated on Thursday it might finish bond shopping for this yr however not increase charges till the second half of 2019.
BAML stated the week had seen $5.6 billion enter international fairness funds, with U.S. shares accounting for a $10.three billion influx and European equities dropping $2.5 billion. Emerging shares funds shed $1.three billion and Japan suffered $400 million outflows.
“It’s a game and world of two halves,” BAML analysts wrote in a reference to the soccer World Cup which began this week in Russia.
“U.S. decoupling from the rest of the world accelerating,” BAML stated, noting that previously six weeks $29 billion had flowed to U.S. shares, contrasting with losses of $13 billion from European markets.
Emerging debt and fairness redemptions now quantity to $12 billion over the previous seven weeks, the financial institution added.
“The bigger picture is global QE is ending, with the United States the sole growth story.”
Moreover, U.S. equities now stand simply three % off all-time highs, whereas euro zone and Chinese shares languish round 30 % off peaks, the observe stated.
European equities have shed almost $20 billion thus far this yr, fund flows knowledge exhibits, and a pan-European fairness index is barely in constructive territory, hit by indicators of a progress slowdown and in addition fears the United States will impose giant import tariffs on items comparable to autos and metal.
U.S. markets in the meantime are benefiting from giant tax cuts in addition to the continued rally in know-how shares.
On bond markets, buyers purchased greater high quality investment-grade debt for the fourth week in a row, placing in $900 million, whereas junk-rated debt witnessed their sixth week of outflows.
Emerging debt funds suffered their eighth straight loss-making week, shedding $1.three billion.
Reporting by Sujata Rao; Editing by Toby Chopra