LONDON, March 10 (Reuters) - The likelihood of a more aggressive U.S. Fed after an expected March rate rise failed to dent stock market investments over the past week, with equity funds receiving $11.8 billion for a 10th straight week of inflows, data showed on Friday.
Bank of America Merrill Lynch (BAML) said that in the week to Wednesday, bond funds had taken in $4.6 billion in new money, with the inflow concentrated in high-grade debt.
The U.S. Federal Reserve is all but certain to raise interest rates next week after a run of strong economic data. Many now reckon policy will be tightened this year more than previously expected, possibly as many as four times.
But world stocks are a whisker off all-time highs amid optimism about global economic recovery and robust company earnings, plus the potentially reflationary effects of mooted added spending by the new U.S. administration.
U.S. stocks received a $7.2 billion inflow while European equities took in $1 billion, the latter seeing inflows for six out of the past seven weeks as economic recovery gathers pace.
Emerging markets too, despite witnessing a pre-Fed retreat in asset prices, enjoyed inflows signalling that jitters over U.S. monetary policy had not entirely eroded appetite for the asset class.
Emerging equity funds received $700 million, while bonds posted their sixth week of inflows with $2.1 billion. Local currency emerging debt was in favour, with their biggest weekly inflow in nine weeks at $800 million.
The European Central Bank pledged on Thursday to retain an aggressive stimulus policy at least until the end of 2017 but signalled less urgency for more policy action. That is leading money markets to price in multiple rate rises in 2018.
BAML analysts said years of stimulus in developed countries had seen bond funds enjoy $1.5 trillion of inflows since 2009, or some 66 percent of assets under management. It termed this a period of “feast” in bond markets.
Equity funds in contrast received only $256 billion in this period, the analysts noted.
But in a sign of the turning cycle, this year’s bond flows are running a whisker below equity funds at $80 billion and $82 billion respectively, BAML added.
Government bond funds saw $500 million flee in the past week for their sixth week of losses. That comes as ten-year U.S. Treasury yields hover at three-month highs and German yields have surged to nearly six-week highs following the ECB’s signals. (Editing by Hugh Lawson)