LONDON (Reuters) – Investors have added to their global equity holdings for the first time in 2-1/2 months and continued to pile into bonds, Bank of America Merrill Lynch said on Friday, as worries about the U.S.-China trade spat sent shudders through financial markets.
The net inflow into equities totaled $900 million in the week to Wednesday, the first in 10 weeks, the bank said, citing EPFR data. That is eclipsed by the $135 billion that has left stocks year to date.
Some $3.9 billion left emerging market equities, the biggest since June last year.
Global equities, which rallied 15% until U.S. President Donald Trump upped the ante in early May, have retreated as tit-for-tat tariffs kicked-in and fading hopes of a trade deal with China in the near-term kept investors away from risky assets.
Washington’s Huawei ban added to trade tensions between the world’s two largest economies and triggered worries about a prolonged standoff over technology.
“U.S.-China tech cold war to run for years, political shift to protectionism and redistribution well underway in West,” BAML said.
Global bonds saw inflows of $6.4 billion, adding to the $158 billion that’s already gone into safe-haven debt this year.
Despite growing worries over a trade war, BAML said it still expects new highs in risk assets this summer and cannot see “Trump escalating China trade war from here”.
Reporting by Thyagaraju Adinarayan; Editing by Catherine Evans