Expectations of Fed rate cuts boost investor risk appetite, with global equity funds attracting significant inflows last week
Expectations of a Fed rate cut boost investor risk appetite, leading to global equity funds attracting $15.73 billion in inflows for the week ending August 21, the highest level since July. Despite concerns about economic slowdown sparked by the July US non-farm payroll report, subsequent economic data shows that the US economy remains robust. The Fed meeting minutes indicate that most participants believe there is a possibility of easing policy at the next meeting, which has also raised expectations of a rate cut. US equity funds attracted $5.97 billion, while European and Asian equity funds received inflows of $5.55 billion and $4.39 billion respectively
According to the Zhitong Finance and Economics APP, encouraged by the expectation of a rate cut by the Federal Reserve in September and the easing of concerns about the US economy, there was a significant inflow of funds into global equity funds in the week ending August 21. Based on data from LSEG, global equity funds saw a net inflow of $15.73 billion in the week ending August 21, the highest weekly net inflow level since the week ending July 17.
Despite the disappointing US non-farm payroll report at the beginning of this month, which raised concerns about a sharp slowdown in the US economy, a series of subsequent economic data releases, including retail sales, consumer confidence, and inflation data, have shown that the US economy still has resilience, boosting investor confidence.
At the same time, minutes from the Fed's July meeting released on Wednesday showed that most participants believed that if data continued to perform as expected, it might be appropriate to ease policy at the next meeting. Most participants noted increased risks to the employment goal, while many participants mentioned reduced risks to the inflation goal. Some participants pointed out that further gradual weakening in the labor market could evolve into more serious deterioration. In addition, many participants believed that the rate stance was restrictive, with several participants suggesting that keeping rates unchanged in the face of continued cooling inflation pressures would mean that monetary policy would increasingly drag on economic activity.
These minutes further bolstered investors' expectations of a rate cut by the Fed in September. Investors are currently closely watching Fed Chairman Powell's speech at the Jackson Hole Global Central Bank Annual Symposium on Friday for clues on the monetary policy trajectory.
By region, US equity funds saw a net inflow of $5.97 billion, the highest level in five weeks; European and Asian equity funds received net inflows of $5.55 billion and $4.39 billion, respectively. By sector, the technology and consumer staples sectors saw net inflows of $0.931 billion and $0.825 billion, respectively, while the utilities sector saw outflows of $0.612 billion.
Furthermore, global investors bought bond funds for the 35th consecutive week, with a net purchase of approximately $11.29 billion, the highest level in three weeks. Among them, corporate bond funds received a net inflow of $2.96 billion, the highest level in five weeks; government bond funds received a net inflow of $2.71 billion
Gold and other precious metal funds received a capital inflow of $1.5 billion, the highest level in two and a half years; energy funds, on the other hand, saw a net inflow of $138 million, reversing the situation of $193 million inflow in the previous week.
