LONDON, Sept 1 (Reuters) - Global bonds attracted bumper inflows of $8.1 billion Bank of America Merrill Lynch (BAML) data showed on Friday, in a week when North Korean tensions escalated, and U.S. President Donald Trump’s threat to shut down the government hurt U.S. stocks.
The BAML data, which tracks fund flows from Wednesday to Wednesday, showed investors preferring the safe havens of bonds and gold over equities in a volatile week that started on the backfoot after Trump’s comments at a raucous rally.
With a budget battle looming, Trump said he would be willing to risk a politically damaging government shutdown in order to secure funding for a border wall with Mexico. He also threatened to terminate the NAFTA treaty with Mexico and Canada to jumpstart negotiations.
Global equities suffered another blow on Tuesday when North Korea fired a missile over Japan, fuelling worries that the tensions between Washington and Pyongyang would escalate. Trump warned that all options were on the table for the United States to respond.
Bonds have now attracted inflows for 24 straight weeks, with investment grade corporate bonds pulling in $5.3 billion, emerging market debt $1.3 billion and government and Treasury bond funds $600 million.
Safe-haven gold attracted $300 million, its third straight week of inflows.
Equities pulled in $1.7 billion but the bulk of this was accounted for by high growth emerging markets, which managed $2.3 billion of inflows, the largest in six weeks.
Emerging market stocks retained their top spot on BAML’s league table of cross-asset winners, returning 28.5 percent year-to-date in dollar terms.
But Europe suffered its biggest outflows in 26 weeks, losing $1.4 billion, hampered by a strong euro, which breached a key level against the dollar.
The euro surged after European Central Bank President Mario Draghi refrained from talking about the currency’s recent strength at the Jackson Hole central bankers’ meeting, and against the backdrop of brewing U.S. fiscal problems.
U.S. stocks attracted a modest $300 million — their first inflows in 11 weeks — but BAML noted outflows over the past 10 weeks stood at a chunky $30 billion.
Investors have shunned U.S. equities in recent months as doubts have grown about Trump’s ability to implement his ambitious tax cuts and spending plans.
Reporting by Claire Milhench Editing by Jeremy Gaunt