Global equity funds draw inflows ahead of Fed decision

Global equity funds attracted significant inflows in the week through December 3 as expectations of a potential Federal Reserve rate cut this week boosted risk sentiment.

Investors bought global equity funds worth a net $7.93 billion during the week in a reversal from approximately $6.41 billion worth of net sales the prior week, LSEG Lipper data showed.

Investors have priced in an 89.6% chance of a 25 basis point Fed rate reduction on Wednesday, the CME Fed Watch tool shows.

European and Asian equity funds saw a net $6.62 billion and $2.69 billion worth of weekly net purchases.

U.S. equity funds, meanwhile, faced outflows for a second successive week, worth $3.52 billion.

Weekly inflows in sectoral funds at $1.41 billion were the largest in three weeks. Industrials and financials drew a notable $495 million and $336 million respectively in inflows.

Global bond funds saw an $8.61 billion weekly net purchase, a tad higher than the preceding week’s $7.38 billion net purchase.

Money market funds, meanwhile, attracted a sharp $110.4 billion, following three weeks of moderate outflows.

Gold and precious metals commodity funds drew the largest weekly net purchase in six weeks, valued at a net $1.93 billion.

In emerging markets, investors pumped $3.11 billion into equity funds for a sixth weekly net purchase. They also snapped up $682 million worth of bond funds, data for a combined 28,796 funds showed.

Wall Street’s main indexes closed lower on Monday, with most S&P 500 industry sectors in the red, while Treasury yields gained as investors waited nervously for the Federal Reserve monetary policy update due in two days.

Hopes for a December rate cut were solidified after last week’s data that showed consumer spending increased moderately toward the end of the third quarter. However, investors are still waiting for clues about future policy moves from what is expected to be the most divided Fed in years.

“It’ll be hard for the market to find a direction that it wants to follow until after the Fed meeting,” said Carol Schleif, chief market strategist at BMO Private Wealth. “We just came off a really strong earnings season and we won’t have earnings again for another four weeks. The only thing that the market really has to hang its hat on or to point to is the Fed.”

Traders are now pricing in a roughly 89% chance of a 25-basis-point rate cut on Wednesday according to the CME’s FedWatch Tool.

Meanwhile, higher yields on U.S. Treasury bonds also put some pressure on equities. The U.S. 10-year Treasury yield rose soon after a powerful earthquake struck off the coast of Japan.

According to preliminary data, the S&P 500 lost 22.56 points, or 0.33%, to end at 6,847.84 points, while the Nasdaq Composite lost 29.33 points, or 0.12%, to 23,549.62. The Dow Jones Industrial Average fell 208.31 points, or 0.45%, to 47,740.99. In individual stocks, Paramount Skydance’s hostile $108.4 billion bid to buy Warner Bros Discovery garnered investor attention as it aimed to outbid Netflix. The bid sent shares of Warner Bros Discovery higher while Paramount’s shares rallied sharply and Netflix sank.

Netflix was a drag on the S&P 500 Communication Services Index, which lagged during the session.

Technology was the strongest sector, with boosts from Microsoft, Nvidia and Broadcom.

Later this week, the focus will shift to tech sector valuations, with earnings reports due from Broadcom and Oracle, as investors have been worried about debt-funded artificial intelligence spending.