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  • Writer's pictureThe San Juan Daily Star

Global Money Market Funds Witness Inflows for Sixth Straight Week

Global money market funds continued to attract strong inflows in cautious trade in the week ended April 5 as a raft of economic data during the week signalled weakening in the U.S. manufacturing activity and a cooling in the labor market.

Funds in the global money market saw purchases worth a net $61.91 billion, that marked a sixth consecutive week of net inflows, data from Refinitiv Lipper showed. Investors also purchased a net $3.38 billion worth of government bond funds.

The U.S., European and Asian money market funds obtained inflows worth $42.51 billion, $25.62 billion and $280 million, respectively.

Riskier equity funds, meanwhile, witnessed $8.37 billion worth of outflows after $17.99 billion net selling in the previous week.

Financials and healthcare sector funds logged outflows of $1.54 billion and $979 million, respectively, although tech received $616 million worth of inflows.

Meanwhile, global bond funds drew $15.16 billion worth of inflows, the biggest amount since July 2021.

Investors purchased $5.26 billion worth of high yield and $1.71 billion worth of target maturity bond funds, but sold $1.15 billion worth of short-term bond funds.

Among commodities, precious metal funds received $685 million in a fourth successive week of net buying, while energy funds saw a marginal $68 million worth of net selling after two weeks of inflows in a row.

Data for 23,935 emerging market funds showed equity and bond funds, both obtained a second weekly inflow, amounting $397 million and $412 million, respectively.

Recession fears have surged in recent weeks, with investors worried the tumult in the banking system sparked by the March collapse of Silicon Valley Bank will tighten credit conditions and hurt growth.

The Fed - which has embarked on one of its most aggressive rate hiking cycles in decades to defeat inflation over the past year - has forecast borrowing costs will remain around current levels to the end of 2023. But market participants believe tighter monetary policy is already starting to hurt growth and are betting on rate cuts later this year.

When looking at that curve inversion in light of recent declines in economic indicators and money supply, “it’s not hard to see why markets may be increasingly thinking ‘policy error’ when reading about further rate hikes,” Citi’s analysts said.

Continuing its inflation-fighting campaign, the Fed last month raised interest rates by a quarter of a percentage point, though it indicated it was on the verge of pausing further increases in borrowing costs after the banking turmoil.

Some Fed officials have recently argued for more hikes, with St. Louis Fed President James Bullard saying on Thursday that the Fed should stick to raising interest rates to lower inflation while the labor market remains strong. Money market investors, however, on Thursday were largely betting the Fed would have cut rates by about 70 basis points by December, from the current 4.75%-5% range. “All this tightening of financial conditions, with the Fed raising rates significantly, now it’s morphing into maybe a little bit of a credit tightening,” said Jack McIntyre, portfolio manager at Brandywine Global. “Our conviction level down the road is that rates are going to be lower,” he said.

Six of the 11 major S&P 500 sector indexes were up in early trading, with a 1.3% rise in tech stocks making them the biggest gainers.

Qualcomm Inc and Advanced Micro Devices Inc climbed 4.5% and 7%, respectively, after Barclays upgraded their stocks to “overweight” from “equal-weight”.

Western Digital Corp jumped 6% on a report that the memory chipmaker cof 11.1 billion shares over the previous 20 sessions.

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