Global money market funds attract $46.1 billion in a week

Investor appetite for liquidity is returning amid escalating geopolitical tensions, a downturn in bond markets, and a resurgence of inflation concerns. Global money market funds attracted $46.1 billion during the week ended September 2, marking the largest weekly inflow since August 5, while flows into bond funds slowed as investors increasingly shifted toward short-term debt instruments.

The United States launched strikes on Iranian military targets near the Strait of Hormuz, while Tehran announced it had targeted U.S. assets across the region. Brent crude rose to $97.62 per barrel, its highest level in about a month and a half, heightening inflation fears.

Concerns about interest rates also resurfaced after Kevin Warsh, chairman of the Federal Reserve Board, stated last week that the central bank would have “work to do” if policymakers were not convinced that core inflation was returning to its 2% target.

Conversely, global equity funds recorded net inflows of $6.65 billion, surpassing the net outflows of $6.13 billion in the previous week. Investors pumped a net $13.09 billion into European equity funds and $4.22 billion into Asian equity funds, while withdrawing approximately $11.12 billion from U.S. equity funds.

Global sectoral funds recorded net outflows of $2.62 billion, as investors ended a two-week inflow streak into technology funds with net sales of $856 million. The financial and industrial sector funds also saw significant outflows of $1.35 billion and $484 million, respectively.

Net flows into global bond funds slowed to $10.01 billion, the lowest level in five weeks, although short-term bond funds attracted $7.43 billion, marking their largest weekly inflow since July 8, according to LSEG Lipper data.

Loan funds attracted inflows of $1.08 billion, while government bond and corporate bond funds recorded net outflows of $3.34 billion and $1.41 billion, respectively.

In emerging markets, investors extended their streak of purchases in equity funds to eight consecutive weeks, with net inflows of $1.99 billion. They also added $646 million to bond funds, according to data covering 28,994 funds.

Regarding U.S. equity funds, outflows continued for a second consecutive week. Investors withdrew a net $11.12 billion from U.S. equity funds in the week ended September 2, compared to net outflows of $22.72 billion in the previous week, according to LSEG Lipper data.

Bond yields and oil prices rose notably earlier in the week. However, strong results from Nvidia and Dell Technologies indicated that spending on artificial intelligence and related market trades remains robust.