Investors pile into safe haven bonds, shun U.S., European stocks: BAML

[February 01, 2019]    By Josephine Mason

LONDON (Reuters) - Investors piled into bonds in the past week and pulled billions of dollars from U.S. and European stocks as they sought safety in assets seen as less risky in times of economic uncertainty, Bank of America Merrill Lynch (BAML) said on Friday.

The bank's report, based on EPFR data which tracks fund flows from Wednesday to Wednesday, showed investors yanked $15 billion from equities in the week to Jan. 30, the tenth outflow of the past 11 weeks.

Some $15.2 billion was pulled from U.S. stocks and $3.7 billion from Europe, marking the 46th weekly outflow of the past 47 weeks from the region.

In turn, bonds recorded inflows of $9.4 billion, their biggest since January last year. Investors pumped $4.7 billion into investment-grade bonds, the most since February last year, the data showed.

Japan and emerging market equities continued to see inflows, with $4.4 billion and $1.3 billion respectively.

Investors have pounced on emerging market equities and bonds in recent months amid expectations that the U.S. Federal Reserve will not raise interest rates as quickly as previously expected, pushing the U.S. dollar.

Cumulative flows in EM debt and equity hit $369 billion last week, just $2 billion shy of the record last January, the data shows.

(Graphic: Emerging Market Inflows - https://tmsnrt.rs/2ToAQvy)

Investors are no longer extremely bearish, with the Bull & Bear indicator at 3.3, its highest since October and up from 2.8 previously, but investor positioning suggests the risk asset rally can continue, BAML said.

For instance, the private client Treasury Bill allocation is at a record high, it said.

The data comes after big swings in stock markets in recent months - the S&P 500 just closed out its best January since 1987 after suffering its worst December in almost 90 years - as investors fret about the U.S.-China trade dispute, U.S. interest rate policy and slowing global economic growth.

(Graphic: TBill allocation - https://tmsnrt.rs/2t11Wgx)

(Reporting by Josephine Mason, Editing by Helen Reid)

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