NEW YORK Investors poured a record $26 billion into stock funds worldwide in the week ended September 18 as global markets rallied on expectations that the U.S. Federal Reserve would maintain its easy-money policies, data from a Bank of America Merrill Lynch Global Research report showed on Friday.
The inflows into stock funds were the biggest on records dating back to 1992, according to Bank of America Merrill Lynch. U.S. stock exchange-traded funds attracted $16.9 billion of the total inflows, according to the report, which also cited data from fund-tracking firms EPFR Global and Lipper.
U.S. shares surged to record highs on Wednesday, the last day of the reporting period, after the Fed said it would maintain the pace of its $85 billion in monthly bond purchases and await more evidence of solid economic growth.
The Standard & Poor's 500 .SPX stock index and the Dow Jones industrial average .DJI hit record highs on Wednesday. Global equity markets also gained after former U.S. Treasury Secretary Lawrence Summers on Sunday withdrew from consideration to be the next Fed chairman.
A potential Summers nomination was viewed as less favorable for the continuation of stimulus measures that have helped boost the S&P 500 Index more than 20 percent this year.
Yields on benchmark 10-year U.S. Treasury notes fell over the week, and plunged 17 basis points to 2.69 percent following the Fed decision. As yields fall, prices rise.
The MSCI world equity index .MIWD00000PUS rose 1.6 percent over the reporting period, while the S&P 500 index rose 2.2 percent.
European stock funds pulled in $3.1 billion, the largest inflows in more than two years, the report said. The FTSEurofirst 300 .FTEU3 index of top European shares rose 0.9 percent over the week.
Emerging market stock funds had inflows of $1.5 billion, down from inflows of $2.6 billion in the previous week but marking the second straight week of new demand for the funds.
The MSCI emerging markets equities index .MSCIEF rose 0.9 percent over the week, partly in anticipation that the Fed would maintain its stimulus. The Fed's stimulus program has kept interest rates low, leading investors to seek higher income in emerging market assets.
Investors poured $1.1 billion in new cash into Japanese stock funds for the second straight week, despite the modest 0.6 percent rise in Japan's Nikkei average .N225 over the week.
Bond funds worldwide had outflows of $1.1 billion, the eighth straight week of outflows from the funds. The outflows came even as selling pressure on bonds tempered over the week on expectations that the Fed would largely keep its bond-buying program in place.
Earlier this month, on September 5, the yield on the safe-haven 10-year U.S. Treasury note briefly rose above 3 percent, a level not seen since July 2011.
Riskier high-yield junk bond funds attracted $2.1 billion in new cash over the week, their largest inflows in eight weeks. Junk bonds are viewed by many investors as a comparable investment to stocks, and funds that hold them tend to attract new demand alongside stock funds.
Emerging market debt funds had outflows of just $300 million, the smallest outflows from the funds in 16 weeks but still marking the 17th straight week in which investors have pulled cash out of the funds.
Commodities funds, which mainly invest in physical gold, had outflows of $200 million in the week, ending four straight weeks of inflows. The price of gold fell 1 percent last Friday and almost 6 percent last week, its biggest weekly loss since the second to last week of June.
Gold prices fell on the reduced likelihood of a U.S. military strike on Syria.
(Reporting by Sam Forgione; Editing by James Dalgleish and John Wallace)