The Great Rotation from emerging markets to developed market equities is now in full swing: while investors pulled out a record €7.1bn from global emerging market equities in July, net inflows into their developed market equivalents were at their highest since February 2014.
Apple’s 11% decline led the fall as US stocks followed Europe and Asia down. But amidst the selling there were some asset allocators that saw more reasons for positivity than for panic.
Alexis Tsipras’s resignation last night and poor factory orders from China on Friday have seen red ink flow across global markets.
Growth in earnings per share has turned negative everywhere but Japan, Bank of America Merrill Lynch pointed out on Thursday.
The IMF confirmed that it would delay a review of the yuan’s inclusion in its special drawing rights currency basket to September 2016, despite China’s latest move to relax control of the yuan exchange rate.
Fund manager sentiment on emerging markets and energy stocks has hit a new low, according to Bank of America Merrill Lynch’s August Fund Manager Survey.
Consumer price inflation rose slightly in July from 0% to 0.1% in July the Office of National Statistics said on Tuesday.
As the eurozone has been flirting with deflation this year, appetite for inflation-linked bonds has been understandably lacklustre. However, as the oil price started a surprise ascent in April, interest in the asset class rose accordingly. With the oil price now below $50 again, investors are once again abandoning the asset class.
The latest fund flow report from Bank of America Merrill Lynch shows a clear move to the hills as investors rotated out of risky assets like high yield and emerging market debt into high quality government bonds and money market funds.
Yi Gang, deputy head of China’s central bank, said that qualified foreign institutions will be allowed to enter China’s FX market in order to bridge the gap between the yuan’s onshore and offshore rate.
FTSE market watchers were hit with a one two punch on Wednesday morning as worse-than-expected UK wage data followed hard on the heels of the news that the renminbi had fallen to a four-year low.
The one-off depreciation of the yuan needs to be just that in order to avoid sparking a currency war and derailing the global recovery, according to industry experts.
