LONDON (Reuters) – With 63 % of MSCI’s international index now in a “bear” market, world stocks look oversold but international fairness funds however attracted inflows of $eight.5 billion over the previous week, Bank of America Merrill Lynch stated on Friday.
FILE PHOTO – A plastic bear sits on a pc display in entrance of the DAX board on the Frankfurt inventory change September 16, 2008. REUTERS/Alex Grimm
World stocks are heading for his or her fifth straight week of losses and look set for his or her worst month in round seven years. The U.S. S&P500 is a whisker off dropping all its features for the yr amid fears that slowing world progress and commerce conflicts will erode firm income.
BAML knowledge – based mostly on evaluation of numbers from Boston-based flows tracker EPFR Global overlaying the week to Wednesday – confirmed that after weeks of fairness promoting, 1,742 of 2,767 international stocks had fallen 20 % off peaks, placing them into a so-called bear market.
In rising markets, the determine was as excessive as 919 out of 1,150 stocks – 80 % of the whole – whereas of 1,899 New York stocks, 1,164 or 61 %, have been in the “bear” bracket.
But rising fairness funds took in $2.6 billion, the very best influx in seven months, whereas Japanese funds acquired $5.three billion.
U.S. shares too absorbed $1.eight billion but Europe has posted outflows in 32 of the previous 33 weeks.
BAML stated regardless of huge market falls just lately and indicators of investor shopping for curiosity, it was too quickly “to flip from bearish to bullish”.
“Big picture explanation – it’s late-cycle and Fed is tightening. Cyclical explanation – peak positioning, peak profits, peak policy stimulus = peak prices in 2018,” the financial institution’s analysts added.
But noting that 70 % of world stocks had been in bear territory in 2011, they stated if the selloff turned out to not be a harbinger of recession, it might sign a superb entry level in the approaching weeks or months.
But ache continued to be felt on bond markets with a fifth week of outflow, dropping $7.2 billion. Investment-grade in addition to junk debt misplaced cash, shedding $three.1 billion and $2.9 billion respectively, whereas rising bonds noticed $1.1 billion outflows.
BAML famous that the annualised near-10 % loss on U.S. Treasuries and four % on funding grade bonds can be the third-largest since 1970.
Reporting by Sujata Rao; modifying by Marc Jones and David Stamp