U.S. bond and stock funds rise in unison-EPFR

NEW YORK May 4 (Reuters) - Investors poured more money into U.S. bond funds than any other bond category while also crowding into U.S. equity funds and reversing a trend of outflows from the group, data from EPFR Global showed for the latest week on Friday.

U.S. bond funds gained $5.89 billion in inflows in the week ended May 2, the most in new money in 23 weeks according to Cameron Brandt, Director of Research for the fund-tracking firm. The inflows into U.S. bond funds dominated the net $7.1 billion into bond funds globally.

U.S. equity funds reaped high inflows of $4.41 billion, a reversal from last week's outflows of $2.38 billion and the first gains in seven weeks. The inflows into U.S. stock funds led to net inflows of $3.8 billion into all equity funds, since European equity funds and some sector-specific funds weighed on the group overall.

"There's no reason not to get involved in riskier assets," said Robert Francello, who cited data that showed that U.S. manufacturing in April grew at the strongest pace in 10 months. He added that any negative data is perceived positively as a potential driver of more economic stimulus from the Federal Reserve.

Markets were choppy during the week in response to GDP data for Spain in the first quarter that indicated a recession and conflicting data on the growth of the U.S. economy. The strong earnings and manufacturing data still helped lift the S&P 500 0.84 percent over the period.

"I think people realize that the global economy is muddling along, but they don't think it's going into a depression," said Wayne Kaufman, chief market analyst of John Thomas Financial.

Higher-yielding bonds proved attractive. Inflows into emerging market bond funds stayed the same at $540 million, while high-yield "junk" bond funds gained $1.84 billion in new money, up from $1.03 billion the previous week.

April was the slowest month year-to-date for new corporate bond issuance, but levels suddenly increased in the latest week and attracted more investors, said Jody Lurie, corporate credit analyst at Janney Montgomery Scott.

Lurie added that concerns over the nearing French elections and concerns over Spain's economy have made the U.S. a "safer bet."

Emerging-market equities also rose to $143 million in inflows from outflows of $377 million the previous week.

"People believe that China is bottoming- that they're not going to have the terrible slowdown that people have been looking for," said Kaufman, who cited a pick-up in China's PMI factory data as supportive.

Money market funds, meanwhile, dipped to $3.88 billion in outflows from inflows of $3.03 billion the previous week.

EUROPE AND EQUITY-SPECIFIC FUNDS

European assets continued to suffer, albeit less than the previous week.

European equity funds had outflows of $1.15 billion, down from the previous week's outflows of $4.58 billion, while European bond funds had outflows of $94 million, also down from outflows of $636 million the previous week.

Europe's markets "are still going to suffer with low or no growth," said Kaufman, who added that the situation is spurring investment into U.S. markets.

Despite the improvement in China's economic data, China equity-specific funds had outflows of $66 million, making it the laggard among the BRIC nation funds.

Among sector-specific funds, healthcare and biotechnology led with inflows of $271 million, while commodities lagged with outflows of $357 million.