Investors channelled $36.33 billion into global equity funds during the week, according to LSEG Lipper data. Consequently, this marked the largest weekly inflow since January 14. The rebound followed a period of volatility linked to artificial intelligence shares.
Inflation Data Lifts Market Mood
Last Friday, US consumer price data showed that inflation rose 2.4% year on year in January. Although this figure came in slightly below the expected 2.5%, it reinforced market expectations for two Federal Reserve rate cuts this year. As a result, investors showed greater willingness to return to equities.
European funds led regional inflows, drawing $17.22 billion. This figure broadly matched the previous week’s $17.68 billion. Moreover, the STOXX 600 index climbed to a record high, which strengthened investor appetite across the region.
In the United States, funds recorded net inflows of $11.77 billion. This reversed the prior week’s $1.48 billion outflow. Meanwhile, Asian funds attracted a net $3.8 billion, adding to the global momentum.
Sector Rotation Supports Broader Demand
Investors diversified their allocations across several sectors. Industrials funds attracted $1.82 billion in weekly net inflows. In addition, metals and mining funds secured $818 million. Technology funds also remained in favour, drawing $696 million.
This rotation signalled that investors looked beyond the dominant artificial intelligence trade. While technology still attracted capital, other industries gained renewed attention. Therefore, market participation broadened across sectors.
Bond Funds Extend Winning Streak
Global bond funds recorded a seventh consecutive week of net inflows, attracting $19.79 billion. Short term bond funds led fixed income demand with $5 billion, marking their strongest weekly inflow since December 24. Furthermore, euro denominated bond funds drew $2.54 billion, while corporate bond funds gained $2.35 billion.
Money market funds received $7.05 billion, extending their inflow streak to four weeks. However, gold and precious metals funds experienced net outflows of $1.86 billion. This ended a five week run of gains.
Emerging market equity funds attracted $8.1 billion during the week. Consequently, year-to-date inflows reached $56.52 billion. Bond funds in emerging markets also posted $1.94 billion in net purchases for a second consecutive week, based on data covering 28,639 funds.
Elias Hilmer, market economist at Capital Economics, noted that the recent underperformance of US technology stocks relative to emerging markets echoed the period before the dotcom bust. Nevertheless, he said the artificial intelligence rally may still have further room to run. He added that if the bubble bursts, emerging market equities could prove more resilient than their US counterparts.
Inputs from Reuters