U.S. fund investors pull most cash from stocks since February: ICI

NEW YORK (Reuters) – U.S. fund investors peeled out of stocks, pulling the most cash since February in the most recent week as global trade tensions vexed markets, Investment Company Institute data showed on Thursday.

FILE PHOTO: Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., June 19, 2018. REUTERS/Brendan McDermid

Investors snatched $18 billion from U.S.-based equity funds, according to the trade group’s data for the week ended June 27. That is the most since the turbulent week ended Feb. 7, according to ICI’s records.

During that week earlier this year the Dow Jones Industrial Average fell nearly 1,600 points in its biggest intraday point drop in history as investors girded for a spike in inflation and bond yields.

Now, conflict between the United States and its trading partners appears to be markets’ biggest boogeyman. Harley-Davidson Inc announced during the week it would move production of motorcycles shipped to the European Union from the United States to its international facilities and forecast the trading bloc’s retaliatory tariffs would cost the company $90 million to $100 million a year.

“Trouble stems from the fact that despite the Trump administration’s steadfast willingness to place tariffs on other nations, there is no clear strategy as to the scope and timing on the next wave of actions,” said Matthew Bartolini, head of SPDR Americas research at State Street Global Advisors, in a note distributed on Thursday.

“This groundswell of ambiguity has frayed investors’ nerves.”

The Trump administration’s tariffs on $34 billion of Chinese imports are due to go into effect on Friday.

That has started to shake the foundations of a long run of success for funds that invest in equities traded outside the United States. Those funds took in cash from 79 straight weeks starting in late 2016 only to have that streak broken this month.

The $5.4 billion that rolled out from those international stock mutual funds and exchange-traded funds during the most recent week is the most withdrawn since an August 2015 selloff sparked by concerns about Chinese growth. U.S. fund investors pulled $12.5 billion from domestic stocks in the most recent week.

Investors have turned to high-quality, short-dated debt for safety. Bond funds attracted $3 billion during the recent seven-day period, marking 19 straight weeks taking in cash, ICI said.

Commodity funds, including those invested in gold, faced a fourth week of withdrawals. Demand for gold, which is priced in dollars, has been pressured by the greenback’s 4 percent rise over the last three months.

Reporting by Trevor Hunnicutt; Editing by James Dalgleish