ETF flows signal shifting investor sentiment

As equity markets rose last week, ETF volumes remained above average and there was some cautious risk-taking to be seen.

There were sizeable redemptions in money market ETFs (US$17bn globally), ending five consecutive weeks of inflows, Cowen reports.

The redemptions funded purchases of equity, bond and (on a lesser scale) commodity ETFs. US equity ETFs saw the bulk of the inflows at $12.3bn, reversing the huge redemptions seen in US equity ETFs the previous week.

A further sign that the risk-off mode may be ending is that gold and precious metals saw outflows last week. ETF Securities reported $40mn of outflows in the asset class, while diversified commodity ETCs ended a six-week run of outflows, with $10mn of net inflows.

iShares Dax saw redemptions of more than €100mn last week, after five weeks of creations.

Cowen reports more subdued primary market volumes in comparison with previous weeks; corporate and high yield bonds saw heavy selling, as did emerging markets ($1.3bn of redemptions globally) and Asia ETFs.

There was a high level of buying in ETF Securities' Short Eur Long USD and, according to Cowen, with clients betting on higher US dollar versus the euro, there are signs that oil may decline.