Money market flows at two-year high on Fed, global slowdown worries: BAML

[October 09, 2015]  LONDON (Reuters) - Investors worried about the global economy and Fed policy pumped $53 billion into money market funds over the past week and withdrew money from both bonds and equities, Bank of America Merrill Lynch said on Friday.

Data from BAML, which also includes figures from Boston-based fund tracker EPFR Global, showed flows to cash-proxy money market funds had jumped to two-year highs and investors had pulled $4.3 billion from global equity funds in the week to Oct. 7. Global bond funds lost $2.4 billion.

Equity funds have lost money for three straight weeks and bond funds have lost in eight of the last nine weeks, BAML said.

Global equities rallied on Friday after minutes from the last Federal Reserve meeting appeared to confirm the U.S. central bank would not rush to tighten policy at a time of slackening global growth.

Most also now expect the European Central Bank and the Bank of Japan to extend their money-printing programs.
 

But gains are tempered by fears the world economy is slowing steadily, and that emerging market weakness is starting to hurt developed countries as well.

U.S. equity funds were set to record outflows for the 30th time in the 40 weeks so far this year, shedding $5 billion.

German and Japanese shares saw hefty outflows, possibly on signs their economic momentum is stalling. Recent data from both countries seem to confirm that view, with German trade and industrial output data this week well below forecasts.

Japan's $2 billion loss was the largest since the fourth quarter of 2014, EPFR said, noting that weak consumer spending and corporate investment were deterring investors.

European equity funds, however, continued their winning streak, taking in $2 billion, as it seems likely the European Central bank will expand its current money printing program.

Emerging market equities which saw redemptions of $60 billion in the first nine months of 2015, posted their 13th consecutive outflow, the longest time in the red since early 2014. But there was a glimmer of hope as the $600 million outflow was the smallest since July.

Flows to Russian equity funds climbed to a 23-week high. A report from Gazprombank, citing EPFR, put the inflow at $100 million.

""The worst is over for emerging markets," BAML said, adding: "The staunching of EM equity outflows illustrates that weak U.S. payroll/dollar-weakness was the best news for EM/commodities/resources complex."

(Reporting by Sujata Rao, editing by Larry King)
 

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