By Sam Forgione
(Reuters) – Investors worldwide pulled $8.5 billion out of funds that specialize in U.S. stocks in the week ended May 20 on appetite for cheaper share prices in Europe, data from a Bank of America Merrill Lynch Global Research report showed on Friday.
Investor aversion to U.S. shares returned after the funds attracted a modest $600 million the prior week, which broke an eight-week outflow streak.
Stock funds overall returned to outflows, with $600 million pulled after $1.9 billion in inflows the prior week, according to the report, which also cited data from fund-tracker EPFR Global.
European stock funds got their first inflows in three weeks, at $3.2 billion, while Japanese stock funds attracted $1.2 billion, their 13th straight week of new demand. Emerging market stock funds attracted $900 million, their first inflows in five weeks.
Bond funds attracted $1.4 billion in inflows after a miniscule $16 million in withdrawals the prior week, which marked the first outflows in 19 weeks. Funds that hold inflation-protected U.S. Treasuries attracted their 10th straight week of inflows, at $200 million.
High-yield bond funds attracted $300 million, their first inflows in five weeks.
“There’s a recognition that maybe the U.S. stock market has gotten a little bit ahead of itself, and Europe hasn’t,” said Clem Miller, portfolio manager at Wilmington International Funds in Baltimore, Maryland, on the outflows from U.S. share funds.
The benchmark U.S. S&P 500 stock index rose 1.3 percent and hit record closing highs on multiple days over the reporting period, while Europe’s FTSEurofirst 300 index of top regional shares rallied 2.8 percent.
Analysts have said that investors have poured cash into European stock funds in recent weeks on the view that the European Central Bank’s 1-trillion euro stimulus program would keep boosting share prices in the region.
ECB Executive Board member Benoit Coeure said during the weekly period that the bank’s asset buying would rise slightly in May and June. Miller of Wilmington said that probably boosted demand for European stock funds.
On the demand for TIPS funds, Miller said expectations of higher inflation in Europe and Japan could be leading investors into the funds, despite data on May 14 showing U.S. producer price inflation fell in April.
“One can’t forget that inflation is a global phenomenon,” he said.
(Reporting by Sam Forgione in New York; Editing by Jennifer Ablan and David Gregorio)