US equity funds gain sixth weekly inflow on Fed rate cut expectations

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(Reuters) – U.S. investors snapped up equity funds for a sixth consecutive week through Dec. 11, spurred by the potential for a Federal Reserve interest rate cut at the upcoming meeting, amid signs of a moderating labor market and cooling inflation.

They acquired a net $6.36 billion worth of U.S equity funds during the week, after a net $8.82 billion worth of additions in the previous week per LSEG Lipper data.

Futures markets predict a 96.7% chance that the U.S. Federal Reserve would reduce rates by a quarter-point at its Dec. 17-18 meeting to support a cooling labor market with about 4.2% unemployment rate in November.

U.S. large-cap and small-cap equity funds experienced strong demand, attracting inflows of $2.33 billion and $2.12 billion respectively. Meanwhile, multi-cap funds garnered $958 million in net purchases, while mid-cap funds saw outflows of $144 million.

In parallel, investors divested $1.22 billion from sectoral funds in the most significant weekly outflow since September 25, with healthcare, consumer discretionary, and financial sectors experiencing liquidations of $898 million, $584 million, and $299 million, respectively.

U.S. bond funds saw a net $4.15 billion worth of purchases during the week, extending a buying trend into the 28th consecutive week.

U.S. short-to-intermediate investment-grade funds garnered $2.95 billion, the largest inflow in three weeks. Additionally, general domestic taxable fixed income and loan participation funds drew substantial inflows of $1.96 billion and $1.06 billion, respectively.

Money market funds, meanwhile, saw a marginal $2.67 billion worth of net outflows following a sharp $121.33 billion worth of purchases in the previous week.

(Reporting by Gaurav Dogra and Patturaja Murugaboopathy in Bengaluru; Editing by Nick Zieminski)