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Flickers of hope for trade and Brexit deals boost risk appetite

The second week of October saw flows to EPFR-tracked High Yield and Emerging Markets Bond rebound, US and UK Equity Funds snap three-week outflow streaks and UK Bond Funds post their biggest inflow since June as Sino-US trade and UK-EU exit deal talks took turns for the better. Investors are also pricing in another rate cut from the US Federal reserve when it meets on the final days of the month.

This cautious optimism was not enough to banish concerns about the outlook for Emerging Asian exporters and the political risks facing continental Europe. Asia ex-Japan Equity Funds recorded their 13th outflow in the past 15 weeks and Europe Equity Funds their 38th in the past 40 weeks. Europe Money Market Funds, meanwhile, chalked up their biggest outflow since late 2Q16.

Overall, EPFR-tracked Equity Funds recorded collective net outflows of $271 million for the week ending Oct. 16, with $800 million flowing out of Balanced Funds and $26 billion from Money Market Funds. Investors steered $584 million into Alternative Funds and $10.4 billion into Bond Funds. Flows into Dividend Equity Funds were positive for the fifth week in a row, extending their longest inflow streak since 3Q17.


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