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Bringing you news, views and analysis since 2013

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Flows bounce back as central bankers hit some of the right notes in early July

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The first week of July saw central bankers in the Eurozone and UK adding their voices to those of US Federal Reserve members arguing that the death of quantitative easing may be a lot less imminent than markets are suggesting.

 
Enough investors were persuaded by these remarks to snap the four week, USD57.8bn outflow streak compiled by EPFR Global-tracked bond funds and end the five week, USD22bn streaks recorded by both emerging markets equity and high yield bond funds. 
 
Overall, bond funds absorbed a net USD2.11bn during the week ending 3 July while equity funds took in a net USD5.98bn as retail commitments hit a 13 week high.
 
Alternative funds collectively posted net outflows for the sixth week in a row, their longest such streak since an eight week run ended in mid-3Q11, but flows into dividend equity funds bounced back to a five week high.
 
Money market funds experienced net outflows of over USD16bn for the week with the bulk of the redemptions coming from Europe money market funds.
 
In contrast to the outflows from Europe money market funds, flows into Europe equity funds hit their highest level year-to-date and Europe bond funds posted their biggest weekly inflow since early May.
 
Soothing comments from central bankers helped nearly all of the major EPFR Global-tracked developed markets equity fund groups, with Canada and Australia equity funds among the few to record outflows. In the case of Europe equity funds investors showed an appetite for country exposure, with Germany, Switzerland and UK equity funds all taking in over USD100m and Italy, Spain and Sweden equity funds also recording solid inflows. Investors largely shrugged off data showing unemployment in the European Union holding at record levels and fears the Portuguese government will collapse, taking its commitment to austerity measures with it, with daily data only turning negative on 3 July.
 
Japan equity funds saw inflows jump to a six week high as they extended a streak that stretches back to mid-January. US and Europe domiciled funds accounted for the bulk of the inflows as investors positioned themselves ahead of an earnings season that, certainly for exporters, is expected to be a good one. 
 
Against a backdrop of fresh turmoil in Egypt, still improving US economic data and declining oil production in Mexico, Venezuela and Nigeria flows into energy sector funds exceeded USD2bn for the first time since 1Q11. Seven of the other 10 major groups tracked by EPFR Global also posted inflows as receding fears about the pace of monetary tightening and a focus on the upcoming 2Q13 earnings season attracted some fresh money.
 
Emerging markets bond funds suffered net redemptions for the sixth straight week but saw the pace of outflows moderate to a fifth of the previous week’s record setting levels. EM corporate bond funds, however, saw redemptions accelerate to their highest weekly total since the current financial crisis began and China bond funds recorded another week of net outflows. 

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