Daily Management Review

Investors divested € 38 billion from European funds amid trade war fears


In June, European investors were withdrawing cash from mutual funds at the fastest pace in almost five years. The outflow was € 38.3 billion amid fears of a global trade war, the Financial Times reported.

Equity, bond and money market funds based in Europe saw a net outflow of at least € 11 billion in the last month, which was the worst result since September 2013, according to Thomson Reuters Lipper.

The flight of investors took place against the backdrop of an aggravation of the trade conflict between the two largest economies in the world. Investors fear that the prolonged US trade conflict with China could disrupt the global supply chain and adversely affect the growth of the global economy.

The head of research Lipper Europe, Middle East and Africa Detlef Glow is convinced that the outflow was provoked by increased insecurity. Investors are afraid of possible trade wars and growing political differences between Iran and the US, which could lead to higher energy prices and, consequently, higher costs for companies. 

June was the second month in a row, when there was a net outflow from long-term funds in Europe. Previous inflow of funds had been lasting during 16 months.

Peter Slip, stock manager of the British asset management company Seven Investment Management, told the FT that the outflow occurred while many markets were under pressure, but noted signs of improvement in July.

"We can blame political uncertainty, trade frictions, the strength of the US dollar, higher interest rates, etc., in the weakness of markets in June 2018, but we had pretty good markets for about 18 months, so it's no wonder they took a breather ", - he said.

In June, US President Donald Trump said that he instructed the US trade representative to prepare a list of Chinese goods worth $ 200 billion, in respect of which additional duties of 10% may be imposed.

On July 6, the previously promised US duties of 25% on imports of Chinese goods for $ 34 billion entered into force. Soon after that, Beijing introduced reciprocal duties on American goods.

source: reuters.com