UPDATE 1-U.S. equity funds have biggest outflow since June 2008 - BofA

Fri Aug 23, 2013 9:44am EDT

NEW YORK Aug 23 (Reuters) - Investors worldwide withdrew $14.3 billion from U.S. equity funds in the latest week, marking the biggest weekly outflow from the funds since June 2008, data from a Bank of America Merrill Lynch Global Research report showed Friday.

Nearly all of the outflows from U.S. equity funds in the week ended Aug. 21 were from exchange-traded funds, the report said, also citing data from fund-tracker EPFR Global.

Investors pulled $10 billion from the SPDR S&P 500 ETF Trust alone, which tracks the performance of the benchmark S&P 500 index, the report said.

The benchmark stock index dropped 2.53 percent over the weekly period as positive U.S. economic data reinforced fears that the Federal Reserve will soon scale back its $85 billion of monthly bond purchases.

U.S. stock markets fell over the week partly on hesitation leading up to Aug. 21, when the Federal Open Market Committee, the U.S. central bank's policy-setting group, released the minutes of its July 30-31 meeting.

The minutes offered few clues on the timing of a reduction in the Fed's bond-buying program, but also did not alter the eventuality of such a reduction in stimulus. [ID: nL2N0GM1EC]

Stock funds overall had $12.3 billion in outflows, marking the first outflows from the funds in eight weeks. Funds that hold European stocks attracted $1.6 billion in new cash, marking an eighth straight week of inflows.

The funds were popular even as the FTSEurofirst 300 index of top European shares fell 2.63 percent over the week.

Bond funds worldwide had outflows of $7.4 billion as yields on benchmark U.S. Treasuries reached two-year highs. Investors pulled $1.3 billion from emerging market bond funds, marking the biggest outflow from the funds in five weeks, according to Bank of America Merrill Lynch.

Rising interest rates in response to fears that the Fed will reduce its stimulus are hurting emerging markets, which have benefited from large cash inflows as a result of the Fed's and other central banks' easy money policies.

Money market funds, which are low-risk vehicles that invest in short-term securities, took in $22 billion in new cash over the weekly period. It was the third straight week that investors poured money into the funds.

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