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Finance

Global equity funds draw biggest weekly inflow in five weeks

Published by Global Banking and Finance Review

Posted on January 31, 2025

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(Reuters) - Global equity funds witnessed a surge in investments in the week through Jan. 29, driven by a record rally in European shares, softened U.S. tariff expectations on China, and prospects of further rate cuts by major central banks.

Investors pumped a robust $15.2 billion into global equity funds during the week, which was their largest weekly net purchase since Dec. 25, 2024, as per LSEG Lipper data.

Investor appetite was boosted by a sharp rally in European shares, which remained strong despite a sell-off in major U.S. AI-linked stocks triggered by concerns over DeepSeek, a low-cost Chinese artificial intelligence model.

The STOXX 600 index in Europe reached a new record of 540.49 on Friday, marking its sixth consecutive week of gains—the longest streak since March 2024.

The European Central Bank lowered interest rates by 25 basis points on Thursday, fueling optimism that U.S. rates might also be reduced further this year following President Donald Trump's comments at the World Economic Forum about his desire to lower global oil prices, interest rates, and taxes.

Meanwhile, the Federal Reserve kept rates steady this week.

European equity funds gained $5.66 billion in net purchases and lead regional inflows. Investors, meanwhile, added U.S. and Asian funds of $5.58 billion and $3.03 billion, respectively.

At the same time, global bond funds witnessed the fifth weekly inflow in a row, to the tune of $21.14 billion.

Government bond funds received $3.25 billion, the highest weekly inflow since Oct. 16, 2024. High yield funds, loan participation funds and inflation linked funds also garnered a significant $2.06 billion, $1.78 billion and $1.52 billion worth of inflows, respectively.

In parallel, money market funds witnessed $40.57 billion worth of outflows, the second weekly net selling in six weeks.

Among commodities, investors divested a net $615.92 million worth of precious metals funds, marking their fourth weekly net selling in five weeks. Energy funds, meanwhile, saw a net $172.87 million worth of net purchases.

Data covering 29,492 emerging market funds indicated that equity funds had outflows for a 12th successive weekly, totaling a net $1.95 billion. Bond funds, however, gained their fourth weekly inflow in a row, valuing a net $2.08 billion.

(Reporting by Gaurav Dogra and Patturaja Murugaboopathy in Bengaluru; Editing by Shreya Biswas)