Hundreds of billions in capital flow back into the stock market, as hopes for peace overshadow the tough test of corporate profitability
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- Global equity funds recorded a net capital inflow for the fourth consecutive week in the week ending April 15, reaching $31.26 billion, marking the largest single-week subscription since March 25. Strong corporate earnings and optimism that the Iran conflict may be resolved sooner than expected jointly boosted risk appetite.
- Brent crude oil continued to trade below $100 per barrel this week, effectively alleviating inflation concerns. Potential U.S.-Iran contact over the weekend was interpreted by the market as a strong signal that the Middle East conflict may be nearing its end. U.S. equity funds attracted $21.25 billion in a single week, European funds saw a net subscription of $9.38 billion, while Asian funds experienced a net redemption of $2.06 billion.
- Industry capital flows reveal structural preferences. The technology sector led with a net inflow of $5.46 billion, while industrials and metals & mining attracted $1.37 billion and $633 million, respectively. The market is placing bets on a restart of the capital expenditure cycle and supply chain repair following the release of a peace dividend.
- Safe-haven assets witnessed significant repricing. Money market funds saw a weekly net outflow of $173.24 billion, the largest wave of redemptions since September 2018. Short-term bond funds also registered a $7.08 billion net outflow, fully reversing the previous week's inflow. Precious metals commodity funds, such as gold, attracted capital for the third consecutive week, with approximately $822 million in net inflows.
- The capital migration roadmap reveals deep-seated anxieties. High-yield bonds and euro-denominated bonds received net subscriptions of $3.64 billion and $1.15 billion, respectively, while emerging market equity and bond funds attracted capital for the second consecutive week. The current exuberance is built on expectations of a ceasefire, and if no substantive diplomatic breakthrough is achieved over the weekend, risk asset exposure will face concentrated correction pressure.
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