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UPDATE 2-Investors book profits from U.S.-based equity funds ahead of Fed meeting

By Jennifer Ablan

(Adds taxable, municipal debt flows; table) By Jennifer Ablan July 25 (Reuters) - U.S.-based equity funds posted more than $8.4 billion of cash withdrawals in the week ended Wednesday, following two weeks of inflows, according to Refinitiv's Lipper. The withdrawals came ahead of next week's Federal Reserve meeting. In the same week, U.S.-based money-market funds attracted $26 billion, their fifth consecutive week of inflows, Lipper said. The Federal Reserve is widely expected to cut interest rates next week to bolster the U.S. economy, even as the U.S. unemployment rate sits at its lowest in 50 years. Broad expectations that the Fed would cut rates to counter the impact of a protracted trade war have helped Wall Street's main indexes scale record levels this month. "Despite plus-side equity returns, both fund investors and ETF investors were net redeemers of equity assets, redeeming a net $8.4 billion for the week," said Tom Roseen, head of research services at Lipper. "Shrugging off progress in the U.S.-China trade talks, a nice start to the Q2 earnings season, and general agreement on the U.S. budget and ceiling, investors showed constraint after learning that Iran had seized a British oil tanker in the Strait of Hormuz, increasing geopolitical concerns." Roseen said investors moved money from equities to bonds. "Both fund and ETF investors padded the coffers of taxable and tax-exempt bond funds, investing net new money in longer-dated issues," he said. U.S.-based municipal bond funds attracted $1.96 billion of net new cash, the group's largest weekly net inflows on record going back to 1992, Lipper said. U.S.-based investment-grade corporate bond funds attracted about $2.5 billion in the week ended Wednesday, their eighth consecutive week of inflows, according to Lipper data. At the lower-end of the credit-quality spectrum, U.S.-based high-yield junk bond funds attracted more than $1.3 billion in the week ended Wednesday, their seventh straight week of inflows, Lipper said. For the fifth week running, investors were net purchasers of money market funds, injecting $26 billion into this safe-haven asset class, Roseen added. The following is a broad breakdown of the flows for the week, including mutual funds and exchange-traded funds: Sector Flow Chg % Assets Assets Count ($Bil) ($Bil) All Equity Funds -8.401 -0.11 7,443.523 11,781 Domestic Equities -7.194 -0.14 5,336.367 8,378 Non-Domestic Equities -1.207 -0.06 2,107.156 3,403 All Taxable Bond 3.957 0.13 2,982.566 5,818 Funds All Money Market 26.049 0.83 3,160.673 1,008 Funds All Municipal Bond 1.957 0.41 482.093 1,342 Funds (Reporting by Jennifer Ablan; editing by Susan Thomas and Lisa Shumaker)