Optimism around U.S. trade deals, stronger-than-expected U.S. economic reports, and a positive start to the corporate earnings season led to a resurgence of inflows into global equity funds in the week through July 23. Investors pumped a net $8.71 billion into equity funds, reversing the $4.4 billion outflow from the previous week, according to data from LSEG Lipper.
Key Drivers of Inflows:
– U.S. and Japan Trade Deal: A new deal between the U.S. and Japan reduced existing import tariffs on Japanese goods to a lower-than-expected 15%, boosting investor confidence.
– Corporate Earnings: Strong earnings from companies like TSMC (record profits) and PepsiCo (upgraded earnings forecast) encouraged risk-taking.
Trade Negotiations: Investors remain hopeful that the U.S. and the EU will resolve U.S. import tariffs, also at around 15%.
Regional Breakdown:
– Europe: Net inflows into European equity funds surged to an 11-week high of $8.79 billion.
– Asia: Asian equity funds attracted $1.17 billion in inflows.
– U.S.: U.S. equity funds saw net outflows of $2.68 billion, though this was an improvement from the previous week’s $11.67 billion.
– Sectors: The technology sector experienced $1.61 billion in inflows, reversing the previous week’s outflows, while financials and industrials saw net additions of $1.13 billion and $1.61 billion, respectively.
In addition, global bond funds saw a 14th consecutive week of inflows, totaling $17.94 billion, with short-term bond funds receiving $4.14 billion, the highest in 13 weeks. Gold and precious metals also attracted $1.9 billion in inflows, marking the largest weekly purchase since June.
Investor Sentiment:
Despite some ongoing uncertainties, such as tariff negotiations and global political instability, the positive earnings reports and encouraging economic data seem to have restored confidence, particularly in emerging markets. Both equity and bond funds in emerging markets saw a return of investor interest, adding $250 million and $2.19 billion in respective inflows.
