BoE stress tests: all you need to know

The Bank of England has released the results of its latest round of its annual banking stress tests and its semi-annual financial stability report this morning. Used to measure the resilience of a bank’s balance sheet in adverse scenarios, the stress tests measured the impact of a severe slowdown in Chinese growth, a global recession […]

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Draghi: Eurozone will decline without vital productivity growth

It’s productivity, stupid. European Central Bank president Mario Draghi has become the latest major policymaker to warn of the long-term economic damage posed by chronically low productivity growth, as he urged eurozone governments to take action to lift growth and stoke innovation. Speaking in Madrid on Wednesday, Mr Draghi noted that productivity rises in the […]

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Asia markets tentative ahead of Opec meeting

Wednesday 2.30am GMT Overview Markets across Asia were treading cautiously on Wednesday, following mild overnight gains for Wall Street, a weakening of the US dollar and as investors turned their attention to a meeting between Opec members later today. What to watch Oil prices are in focus ahead of Wednesday’s Opec meeting in Vienna. The […]

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Banks, Financial

RBS emerges as biggest failure in tough UK bank stress tests

Royal Bank of Scotland has emerged as the biggest failure in the UK’s annual stress tests, forcing the state-controlled lender to present regulators with a new plan to bolster its capital position by at least £2bn. Barclays and Standard Chartered also failed to meet some of their minimum hurdles in the toughest stress scenario ever […]

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Barclays: life in the old dog yet

Barclays, a former basket case of British banking, is beginning to look inspiringly mediocre. The bank has failed Bank of England stress tests less resoundingly than Royal Bank of Scotland. Investors believe its assets are worth only 10 per cent less than their book value, judging from the share price. Although Barclays’s legal team have […]

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Categorized | Capital Markets, Equities

US funds see biggest post-Brexit outflows

Posted on September 23, 2016


US stock funds suffered their largest redemptions since the aftermath of the UK’s Brexit vote in a period that culminated with the US central bank leaving policy unchanged.

The redemptions in the week to September 21, which data provider EPFR calculated as the biggest in 12 weeks, capped a choppy period for markets as investors awaited decisions from the Bank of Japan and Federal Reserve, propelling many investors to the sidelines.

    A cautious Fed ultimately decided to leave rates unchanged despite several dissensions and paved the way for a December rate rise — a full year after it began to normalise policy last year. The BoJ by contrast unleashed new policies to cap yields on 10-year bonds and promised to surpass its 2 per cent inflation target in an attempt to stimulate growth.

    The benchmark S&P 500 and FTSE All World Index have climbed roughly 1.5 per cent since the Fed released its policy decision on Wednesday, while yields on 10-year Treasuries slid. Yields on bonds decline as prices rise.

    The decision, which landed hours before the weekly fund flow figures were calculated, showed some renewed appetite for risk after chair Janet Yellen delivered the Fed’s decision. Daily fund flow data, which does not capture as complete a view of investor moves as the weekly figures, showed inflows to emerging market equity and bond funds, as well as riskier high-yield bond portfolios on September 21.

    Emerging market debt and equities, as well as US corporate debt, have been among the prime beneficiaries of stimulative global monetary policies, particularly bond-buying programmes under way by the European Central Bank and BoJ.

    “While the [Fed] is increasingly concerned about the need to restore policy to a more normal stance, it is struggling to understand what the neutral interest rate is or should be,” said Robert Eisenbeis, the vice-chairman of Cumberland Advisors.

    Global equity funds recorded redemptions of $6bn while global bond funds added $3.8bn in the week to Wednesday, the EPFR data show. Outflows from German, Spanish and French equity funds continued.

    Money market funds, safe haven accounts often considered a proxy for cash, were flushed with more than $15bn of new cash from investors.

    Separate data tracked by Lipper show high-quality corporate bond funds attracted $2.1bn in the past week, the 12th consecutive week of fresh capital, while funds invested in US Treasuries added $1bn, its biggest one-week haul since February.