Cash, stocks attract billions as investors seek inflation havens

Bloomberg

Investors are putting billions of dollars into cash and stock funds as they seek protection from surging inflation.
Cash saw the biggest inflows in six weeks at about $54 billion, while exchange-traded funds led additions of about $12 billion into equities in the week through June 8, according to Bank of America Corp (BofA) note, which cited EPFR Global data. US stocks were the primary beneficiaries of inflows with about $13 billion, while bond fund outflows resumed, the data showed.
After being hammered this year by surging inflation and hawkish central banks, stock markets struggled to recover amid fears of a potential recession. The S&P 500 bounced back after flirting with a bear market last month, but it remains more than 16% below its January record high and is on track for its ninth weekly decline in 10. Investors will be closely watching US inflation data for clues on the pace of monetary tightening.
Bank of America’s Michael Hartnett said in the note that the US economy is “a couple of bad data points away from
‘recession’.”
“We’re in technical recession but don’t realise it,” he wrote. “In short, inflation shock not over, rates shock just starting, growth shock coming, no release valve from peak in yields, bear market rally too consensus.”
US large-caps saw inflows of $14.5 billion in the week, while outflows hit US small-caps, value and growth shares, according to BofA’s note. Among sectors, materials and health care had the biggest inflows, while financials, communication services, and technology saw biggest outflows.
Among regions, European stocks continued to face outflows for the seventeenth week, while emerging-market and Japanese equity funds also saw redemptions.

Futures mixed before
inflation data
US equity futures were mixed before inflation data that may help decide the course of the Federal Reserve’s tightening path. Bonds stabilised.
S&P 500 futures dipped after the S&P 500 shed 2.4%, while contracts on the tech-heavy Nasdaq 100 were steady. The Stoxx Europe 600 Index fell 1.5%, with all sectors in the red.
Treasury yields steadied near the 3% level while German government bonds recovered after a selloff following the European Central Bank tilt towards aggressive policy and the possibility of a half-point interest-rate hike later in the year.
Policymakers “are looking for ‘clear and convincing evidence’ that inflation in the US is going to start falling back from its eye-watering level,” Nick Chatters, investment manager at Aegon Asset Management, wrote in a note. “Wishful thinking?”
Asia’s stock market was on the back foot Friday but off session lows as investors assessed China’s outlook and girded for US inflation data. Chinese tech shares including Alibaba Group Holding Ltd. reversed an early-session swoon, helping the region’s equity index to keep losses below 1%. The dollar edged higher and the yen snapped a slide.