Increasing concern about the effect of a possible trade war between the US and China has forced investors in equity funds to head for the exits.

Investors pulled $29.7 billion from equity funds in the week ended June 27, the second largest weekly outflow since the beginning of the millennium, according to data provider EPFR.

The retreat follows Washington’s move to impose tariffs on $50 billion of Chinese imports. US president Donald Trump has also threatened to add tariffs to a further $200 billion of Chinese imports if Beijing retaliates.

The withdrawals from equity funds have weighed on the US benchmark S&P 500 index which has retreated 4.8 per cent from its all-time high in January. At the same time, China’s Shanghai Composite has become a bear market, falling more than 20 per cent from its January peak.

In addition, the Chinese renminbi fell last week to its lowest level of the year amid worry that the tension over trade between Washington and Beijing might also lead to a currency war.

The deterioration in risk appetite evident in equity fund outflows is also illustrated by rising demand for US Treasury bills, viewed as one of the safest asset classes available. Bank of America Merrill Lynch noted that allocations to Treasury bills among its private client allocations had surged to a 10-year high.