UPDATE 1-Global investors pull $600 mln from stock funds - BofA

Fri Jun 27, 2014 2:08pm EDT

(Adds additional flows, market performance, analyst comment)

NEW YORK, June 27 (Reuters) - Fund investors worldwide pulled $600 million out of stock funds in the week ended June 25 on concerns surrounding European growth, data from a Bank of America Merrill Lynch Global Research report showed on Friday.

The outflows were a reversal from the prior week's massive $12.6 billion of inflows and marked the first withdrawals in three weeks. Bond funds attracted $4.7 billion in new cash, according to the report, which also cited data from fund-tracker EPFR Global.

Funds that mainly invest in European stocks posted $1.6 billion in outflows, marking their biggest outflows since May of last year. Data over the week showed flagging business sentiment in Germany and a slowing of euro zone private sector expansion in June.

"There certainly are some concerns with respect to the robustness of European economic growth," said Doug Gordon, senior investment strategist for North America at Russell Investments, which oversees roughly $260 billion in assets.

Funds that specialize in U.S. stocks attracted $2 billion in new cash, down from inflows of $8.4 billion in the prior week. Funds that hold U.S. utilities shares attracted $900 million, marking their second straight week of strong demand.

The net inflows for bond funds and net outflows from stock funds underscore how investors have been lured by the solid performance of bonds this year and see them as a safer alternative to equities, which recently touched record highs.

The benchmark Barclays U.S. Aggregate Bond Index has risen 3.9 percent this year.

Emerging market equities funds attracted $1.2 billion in inflows, marking their third straight week of new cash. Japanese stock funds attracted $300 million, marking their first inflows in four weeks after Japan's benchmark Nikkei stock index rallied 1 percent over the week.

The inflows into bond funds contrasted with the prior week's outflows of $2.3 billion, which were the first in 15 weeks. Analysts said demand for bond funds has gained momentum given expectations the U.S. Federal Reserve is unlikely to raise interest rates anytime soon.

"We think there may be more dovish tones coming out of the FOMC that will certainly keep yields suppressed to a point," said Gordon of Russell, referring to the U.S. central bank's policymaking Federal Open Market Committee.

Investors committed $800 million to riskier high-yield junk bond funds, reversing the prior week's $700 million in outflows, which were the first in 19 weeks. Funds that mainly hold safe-haven U.S. Treasuries posted $800 million in outflows, marking their fifth straight week of outflows.

Funds holding inflation-protected Treasuries (TIPS) attracted a modest $100 million, marking their first inflows in four weeks, while emerging market debt funds attracted $500 million, marking their 13th straight week of inflows. Investors have noted improving growth prospects in emerging market countries.

Commodities funds attracted $200 million, marking their first inflows in four weeks. (Reporting by Sam Forgione; Editing by James Dalgleish and Paul Simao)

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