(Adds economist quote, detail on flow figures; byline)
By Sam Forgione
NEW YORK, Oct 17 (Reuters) - Investors worldwide pulled a net $5.7 billion out of European stock funds in the week ended Oct. 15, their biggest weekly withdrawals on record, data from a Bank of America Merrill Lynch Global Research report showed on Friday.
“Europe’s growth problems are immense,” said Scott Anderson, chief economist at Bank of the West. “The German growth engine appears to be faltering at a time when Europe’s economy remains heavily dependent on solid growth continuing there.”
Stock funds overall posted $2 billion in net outflows, marking their third straight week of outflows, according to the report, which also cited data from fund-tracker EPFR Global. Emerging markets equity funds posted $2.3 billion in outflows, marking their second straight week of withdrawals.
U.S.-focused stock funds attracted $8.1 billion, with inflows into exchange-traded funds accounting for all of the new cash while U.S.-focused stock mutual funds posted $3.2 billion in outflows, according to the report.
Bond funds attracted $6.3 billion in net inflows, marking their fourth straight week of inflows. Funds that mainly hold U.S. Treasuries attracted $3.9 billion, marking their biggest inflows in 10 weeks, while riskier high-yield bond funds posted $2 billion in outflows, their seventh straight week of withdrawals.
Flight to safety into U.S. Treasury bonds has been massive, Anderson said. The 10-Year Treasury yield traded below 2.0 percent for brief periods on Wednesday and Thursday for the first time since May 21, 2013, before former Federal Reserve chairman Ben Bernanke signaled the Fed was planning to reduce its monthly asset purchases.
“Markets are clearly concerned about the growth and inflation outlook for Europe, and trying to gauge the implications for the U.S. economy, inflation, and Fed monetary policy,” he said. High-yield corporate bond spreads widened out to 5.08 percentage points this week, up from a modest 3.35 percentage points as recently as June. It is the highest credit-risk spread on these securities in over a year, Anderson noted.
The insatiable appetite for yield in high-quality fixed-income was still apparent with investment-grade bond funds attracting $5.6 billion in new cash. Floating-rate debt funds, which are protected from rising interest rates, posted $1 billion in outflows, marking their 14th straight week of outflows. (Reporting by Sam Forgione Editing by Jennifer Ablan and David Gregorio)