European Large-cap ETFs Suffer In March Amid Worsening Macro Environment

According to data from TrackInsight, the asset class reported outflows of €3.9bn over the month, reflecting investor concern over Italy's failure to form a government following the expected hung parliament on 4 March.

However, what was not expected was Matteo Salvini's right-wing League party winning more votes than coalition partner ex-Prime Minister Silvio Berlusconi's Forza Italia, which only won 13.9%.

Along with Salvini's 18% gain, anti-establishment party M5S posted stronger-than-expected results by winning 32% of the vote and becoming the country's biggest party.

The situation is yet to be resolved. Italian president Sergio Mattarella kicked off a two-day round of formal discussions on Wednesday (4 April) but the process is expected to either take months or fail completely, keeping markets very much in the dark.

Further, the ECB became more likely to halt its support of the European bond market in September after it removed its commitment to increase purchases in March's governing council meeting.

ECB president Mario Draghi is yet to confirm whether the €2.5trn QE programme will end in September and played down the importance of the removal of the commitments.

However, one bright spot for investors in Europe was German chancellor Angela Merkel securing another term after forming a "grand coalition" with the SPD party on 4 March.

US outflows

US large caps witnessed a torrid month posting the highest negative flows of all asset classes with €14.9bn.

The outflows were largely driven by concerns over President Donald Trump's threat of a trade war with China and a sell-off in technology stocks.

On 3 April Trump placed 25% tariffs on approximately 1,300 Chinese products, to which Asia's largest economy responded by announcing tariffs on 106 US products such as soybeans, cars and whiskey.

Meanwhile, news that Facebook had sold the personal information of 50 million users to data firm Cambridge Analytica on 19 March, caused the stock to fall 10.4% over the month.

Fears over increased regulation on the sector sent the Nasdaq to its worst month since January 2016, dropping 2.9%.

Elsewhere, global stocks recorded positive flows of €4.1bn as investors remained bullish about the prospects for global growth while small caps also saw inflows of €3.8bn.

In emerging markets, Asian large caps and emerging bonds were both in the red with outflows of €70m and €415m respectively, while emerging stocks posted inflows of €2.6bn.

Fixed income investors adopted a risk-off approach as developed investment grade bonds and developed government bonds reported inflows of €1.5bn and €3.6bn respectively, while developed high yield bonds suffered outflows of €69m.

TrackInsight's data covers both US and European-listed ETFs, which together comprise roughly 70% of the total market.