Investors pull money from US equity funds ahead of earnings reports from AI hyperscalers
US equity funds recorded their first weekly outflows in three weeks in the week ended October 28, as investors grew cautious ahead of earnings from major AI hyperscalers amid concerns about the rising cost of their AI build-outs.
Investors withdrew a net $6.65 billion from US equity funds during the week, marking the first weekly outflow since October 7, according to LSEG Lipper data.
Microsoft reported a strong cash-flow beat earlier this week and forecast robust cloud growth, offering fresh evidence that its substantial AI investments were paying off. However, Alphabet and Amazon disappointed investors with their results.
US large-cap funds recorded $3.8 billion worth of outflows, partly reversing inflows of $8.72 billion the prior week. Investors also shed mid-cap funds of $2.11 billion, small-cap funds of $832 million and multi-cap funds of $303 million.
Sectoral funds recorded net weekly inflows of $3.52 billion — the largest in three weeks — driven largely by $4.54 billion in net purchases of technology funds. Financial and healthcare sector funds saw outflows of $713 million and $701 million, respectively.
US bond funds attracted $2.04 billion, as demand recovered after a net $969 million worth of sales in the prior week.
Municipal debt funds, general domestic taxable fixed-income funds and inflation-protected funds recorded net purchases of $1.74 billion, $1.31 billion and $1.08 billion, respectively.
Meanwhile, short- to intermediate-term government and Treasury funds and short- to intermediate-term investment-grade funds saw outflows of $2.48 billion and $1.59 billion, respectively.
Money market funds recorded net outflows of $47.66 billion, following roughly $14.97 billion in inflows the previous week.
Credit ratings agency Fitch on Friday revised France’s outlook to “negative” from “stable”, warning that deteriorating fiscal conditions and political fragmentation are undermining debt stabilization prospects.
The agency pointed to weaker growth, higher borrowing costs and a wider deficit since its August review, compounded by a fractured political landscape that is making sustained fiscal consolidation harder to deliver.
The French economy unexpectedly shrank in the third quarter, while October inflation accelerated to the highest level since late 2023, due to what Economy Minister Roland Lescure described as an unprecedented mix of external and internal shocks.
The outlook revision adds to pressure on the government ahead of more planned protests this weekend, underscoring the political challenges of implementing spending cuts and deficit-reduction measures.
French 10-year yields hit their highest since 2002 last week at more than 5.14%, rising more sharply than those of most peers, reflecting greater sensitivity to shifts in market confidence amid concerns over France’s fiscal trajectory, struggle to pass a budget and social unrest.
The move heightens the risk of a future downgrade for the euro zone’s second-largest economy, which has already seen its borrowing costs climb sharply, weighing on its debt outlook.
“The emerging policy debate ahead of the presidential election has not materially strengthened Fitch’s confidence in the prospects for durable deficit reduction that could lead to debt stabilization,” the agency said.
