Alan John
LONDON (Reuters) – U.S. large-cap stocks experienced their biggest weekly outflows since December 2022 in the week ended Wednesday, Bank of America said, as traders nervous that persistent inflation will lead to further rate cuts and geopolitical tensions increase caution.
U.S. large-cap companies saw outflows of $15.8 billion over the week, while equities as a whole saw outflows of $19.6 billion, Bank of America said in its weekly review of flows into and out of global markets. using EPFR data.
The week leading up to Wednesday saw Wall Street fall last Thursday on hawkish Federal Reserve officials and oil’s rise above $90 a barrel, and a selloff in stocks this Wednesday on stronger-than-expected inflation data. USA. [.N]
Following this data, markets moved expectations for a Federal Reserve rate cut from June to September (although prices are volatile), which has implications for other central banks, including European ones.
Japanese stocks saw their first weekly outflow in more than three months, although even after the outflows, major stock markets in the US, Japan and Europe remain at or near record highs.
From a broader perspective, the BofA report describes how “Everything But Bonds” sentiment is driving demand for inflation hedges such as gold (currently also near record highs) and “monopoly cash flows” supporting flows into stocks of large US technology companies.
The annual 10-year U.S. Treasury yield is at a 65-year low as the decade marks the end of the “40-year bond bull market,” according to BofA calculations.
“The 2020s era of war, protectionism, fiscal surplus, energy, housing (and) labor shortages (equals) higher inflation and higher costs of capital until recession causes ‘the humiliation of bond buying,'” the Bank of England note said. .
Yields on two-year U.S. Treasury notes, sensitive to interest rate expectations, are near a five-month high and have risen nearly 70 basis points this year. The 10-year Treasury yield has risen about 79 bps this year.