Please respect FT.com's ts&cs and copyright policy which allow you to: share links; copy content for personal use; & redistribute limited extracts. Email ftsales.support@ft.com to buy additional rights or use this link to reference the article - http://www.ft.com/cms/s/0/c1e59062-c4f5-11e0-9c4d-00144feabdc0.html#ixzz1UpWXsmTO
Investors have rushed to park a record $50bn in global money market funds this week, yanking money out of bonds and equities after mounting fears over another global recession rattled financial markets.
Money market funds tracked by EPFR Global, a data provider reversed last week’s record outflows to register net inflows of $49.8bn in the week ending on August 10, while most other funds were struck by sharp redemptions.
Please respect FT.com's ts&cs and copyright policy which allow you to: share links; copy content for personal use; & redistribute limited extracts. Email ftsales.support@ft.com to buy additional rights or use this link to reference the article - http://www.ft.com/cms/s/0/c1e59062-c4f5-11e0-9c4d-00144feabdc0.html#ixzz1UpWZAZzW
“An imperfect storm of downgrades, rumours, lacklustre macroeconomic data and the eurozone debt crisis transformed a retreat by investors into something approaching a stampede,” EPFR Global said in a statement.
The data underlines the extent of increasing investor pessimism over the stalling strength of the global economic recovery, and nascent fears that some western countries could slip back into recession.
High yield bond and floating rate funds suffered their biggest weekly outflows since the data provider started tracking them in the second quarter of 2005 and the first three months of 2007 respectively.
Withdrawals from emerging markets equity funds, global equity funds and bond and balanced funds all hit levels last seen during the financial crisis in 2008. Real estate sector funds suffered their worst week of redemptions in nearly four years and outflows from US equity funds surged to a 63 week high.
Overall, equity funds reported collective outflows of $26.1bn, while a record $10.4bn was pulled out of bond funds, EPFR said.
“Financial markets have been rocked by heightened concerns about euro area sovereign debt and fears of another global recession,” Barclays Capital said in a research note on Friday.
“We do not expect a renewed recession, but policymakers, particularly in Europe, will need to intensify their efforts if bearish investors are to be assuaged,” the bank’s analysts added.
Apart from money market funds, which are seen as safe but low-yielding havens, the only funds tracked by EPFR that registered inflows were commodities sector funds specialising in gold and precious metals, emerging market local currency bond funds and Japan equity funds.
A partial ban on short selling in the eurozone boosted European bank shares on Friday but led to confusion among market participants unclear about how the rules would be applied.
The ban on the short selling of financial stocks for 15 days was in response to sharp share price falls this week. It was introduced by France, Italy, Spain and Belgium on Friday but other regulators declined to go along with a European Union-wide prohibition.
France led the calls for the ban the controversial practice, which came into effect on Friday, after arguing that its banks came under specific attack from speculators. The Spanish and Italians shared some of their concerns and were willing to follow its lead. The Belgians agreed to join because their companies also trade on Euronext.
