Investors Rush to Global Money Market Funds

Amid fading rate cut euphoria, investors are flocking to global money market funds ahead of key U.S. employment reports.

Investors poured a massive $111.44 billion into global money market funds on a net basis during the week leading to Jan. 3, marking the biggest weekly amount since March 22, 2023. This surge in investment comes as caution sets in ahead of key U.S. employment reports, which may influence expectations of Federal Reserve rate cuts. The U.S. unemployment data released on Thursday indicated a still resilient U.S. labour market, tempering prospects of deep rate cuts by the Federal Reserve this year. The release of monthly U.S. payrolls figures later in the day would further influence expectations about the timing and pace of rate cuts.

Both U.S. and European money market funds witnessed aggressive buying as they drew $56.92 billion and $56.05 billion, respectively, in inflows. However, Asian money market funds witnessed $3.86 billion worth of outflows. Conversely, global equity funds recorded about $230 million worth of outflows after having received $15.95 billion in inflows in the previous week. The industrials sector funds led outflows, with a net $292 million leaving, followed by $247 million and $242 million worth of respective net selling in metals & mining, and healthcare.

Among commodities, investors pulled a net $805 million out of precious metal fund, breaking their four-week-long buying string. Energy funds also had about $20 million worth of outflows. Data encompassing 29,076 funds in the emerging markets showed that equity and bond funds both attracted inflows for a second successive week, totalling $1.05 billion and $1.59 billion, respectively.

The influx of investment into global money market funds, coupled with the outflows from global equity funds and certain sectors, reflects the cautious approach of investors in light of the upcoming U.S. employment reports and their potential impact on Federal Reserve rate cuts.