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Following The Money Flows: India And Europe Still Hot

UBS Global Research published a report on March 25th titled “Global Multi Asset Comment – Global Positioning Summary: How are investors positioned and where is money flowing? Analysts Ramin Nakisa and Stephane Deo highlight that money flows continue to pick up in Europe and India, and that industrial metals are moving up on dollar weakness.

Europe, Japan, India and Russia saw increased money flows this week

Money Flows

The first point the UBS analysts make is that Treasury ETF outflows continued last week even though expectations are now only for Fed funds to hit 0.625% by the end of this year. European and Japanese equities also “continued to be popular, and in EM. India and, much more surprisingly, Russia were also popular.”

Nakisa and Deo also highlight that the global volatility in the EM FX market regarding the U.S. FOMC meeting makes it clear that Indian rupee is highly resilient relative to other currencies.

Money Flows

Industrial metals up, but gold remains weak

The UBS report also notes that “both CFTC speculative futures positioning (albeit pre-March-FOMC) and ETF flows show that gold fails to regain its lustre despite the prospect of a later Fed hike.”

They argue there was major growth in gold shorts leading into the FOMC meeting, and the rally following March 18th was largely related to short covering. The UBS precious metal strategists are maintaining their 30-day forecast of $1200 and 90-day forecast of $1170. On the other hand, industrial metals have clearly benefited from continued dollar weakness over the last two weeks, and moreover, sentiment in ETF flows is also turning positive.

Money Flows

UBS notes U.S. equity and bond funds saw strong inflows in January

Money Flows

Also of note, U.S. mutual funds recorded net outflows in January after three straight months of inflows, although much of the outflow was related to money market funds. Both equity and bonds enjoyed relatively inflows in January compared to outflows in December last year. Equity mutual funds had the largest inflows since May at $12.3 billion because of positive macro-economic data in January. Bond funds also enjoyed robust inflows of $9.9 billion for the month despite looming Fed rate hikes.

Money Flows