Global Investors Flood Money Market Funds Amid Market Volatility, Reports Reuters

Global investors significantly increased their investments in money market funds during the week ending August 7, as they sought safety amid heightened market volatility driven by fears of an economic slowdown in the U.S. and a rising yen that led to the unwinding of carry trades.

Data from LSEG revealed that investors poured $98.58 billion into global money market funds during this period, marking the largest weekly net purchase since early April.

Concerns over a potential recession were reignited by disappointing U.S. payroll figures and a sharp decline in July’s manufacturing data, raising alarms for global companies that depend on exports to the U.S.

The Nikkei share average dropped 12.4% on a Monday, marking its biggest single-day decline and reminiscent of the infamous ‘Black Monday’ stock market crash of October 1987.

This risk-averse mentality led to a $6.33 billion outflow from global equity funds during the week, the first such outflow in seven weeks. Regionally, U.S. equity funds experienced a net withdrawal of $7.39 billion after three consecutive weeks of inflows, while European funds saw outflows of $4.54 billion. In contrast, Asian funds welcomed inflows totaling $4.61 billion.

Sector-wise, technology and financial sectors faced significant outflows, amounting to $1.11 billion and $1.09 billion, respectively. Conversely, utilities managed to secure their sixth consecutive week of inflows, gathering $529 million.

Global bond funds remained in favor for the thirty-third straight week, attracting $6.26 billion in inflows. Corporate bond funds recorded net investments for the tenth week in a row, with inflows of $2.06 billion. Government bond funds saw $1.32 billion in inflows, though loan participation funds suffered outflows of $2.98 billion.

In the commodities sector, investors acquired energy funds worth a net $208 million, continuing a streak of five weeks of net purchases. However, precious metal funds experienced outflows of $700 million, marking the first net selling in four weeks.

In emerging markets, data covering nearly 30,000 funds indicated a net outflow of $2.79 billion from equity funds, which marks the ninth consecutive week of selling. On a more positive note, bond funds in emerging markets saw inflows of $1.49 billion.