NEW YORK, Oct 4 (Reuters) - Investors in funds worldwide
pulled $1.3 billion from stock funds in the latest week, as the
U.S. government partially shut down because of a budget impasse
and more concerns arose about the debt ceiling, data from a Bank
of America Merrill Lynch Global Research report showed Friday.
The outflows from stock funds, in the week ended Oct. 2,
extended the prior week's withdrawals of $1.5 billion, according
to the report, which also cited data from fund-tracking firm
EPFR Global. Congress failed to reach a midnight deadline to
agree on a spending bill, leading to the shutdown on Oct. 1.
The shutdown was the first in 17 years. Worries also grew
ahead of a looming fight between Democratic and Republican
lawmakers over raising the U.S. debt ceiling. The United States
could face an unprecedented default if Congress does not raise
the $16.7 trillion debt limit by Oct. 17.
Outflows from stock and bond funds over the past two weeks
have been small, compared with outflows of $60 billion over the
three weeks beginning July 28, 2011, the report said. Those
outflows came during a prior round of debt ceiling debates that
led Standard & Poor's to cut the U.S. credit rating from AAA to
Emerging market stock funds had outflows of $2.1 billion in
the week ended Oct. 2, marking their first outflows in four
weeks, the report said. U.S. stock funds had smaller outflows of
$600 million, less than one-tenth of the prior week's outflows
of $7.4 billion.
Despite worries over the U.S. government shutdown and debt
ceiling, the S&P 500 stock index rose a slight 0.1
percent over the weekly period. MSCI's emerging market stocks
index fell 1 percent.
European stock funds, meanwhile, attracted $900 million in
new cash, down from inflows of $2.3 billion the prior week but
still marking their 14th straight week of inflows. The inflows
came despite the FTSEurofirst 300 Index 's decline of 0.8
percent over the weekly period.
Investors pulled $900 million from bond funds, reversing the
prior week's inflows of $4.5 billion, which were the biggest in
five months. Despite the outflows from risky stocks, risky
high-yield junk bond funds attracted $1.3 billion, marking their
fourth straight week of inflows.
Emerging market bond funds had $200 million in outflows,
reversing inflows of $600 million the prior week. Funds that
hold Treasury Inflation Protected-Securities also had outflows
of $200 million, marking the 25th straight week of withdrawals
from the funds.
TIPS prices have been hit by a bond market selloff following
signals in May that the Federal Reserve could scale back its $85
billion in monthly bond purchases this year. The Barclays U.S.
TIPS Index was down 6.6 percent for the year.
Investors also pulled $600 million from commodities funds,
which mainly invest in physical gold. The precious metal on Oct.
1 slid below $1,300 per ounce to its lowest price since early