Confidence among European investors down in April, says State Street

Investment confidence decreased among European investors in April, while sentiment among North American institutional investors was broadly unchanged during the month, according to the latest results of the State Street Investor Confidence Index (ICI).

Global ICI fell by 0.7 points from 87.1 to 86.4 during the month. Decrease in sentiment was of 2.2 points for European investors while Asian investors showed a slight improvement in risk appetite, with confidence rising by 2.3 points.

The index measures quantitatively investors’ confidence or risk appetite by analyzing the actual buying and selling patterns of institutional investors: the greater the percentage allocation to equities, the higher risk appetite or confidence.

“Recent market movements have vindicated the pessimistic stance adopted by global institutional investors this year. Although confidence did not exhibit any meaningful deterioration this month, it remains at depressed levels. The stresses emanating from the euro-region continue to cause investors concern, and increase the attractiveness of cash and fixed income over equity investmentsFroot,” said Kenneth Froot, professor at Harvard University who developed the index with Paul O’Connell of State Street Associates.

He added that the increase in confidence among Asian investors this month is notable, but given that the index for that region is coming off a record low, it is not in itself a strong signal of optimism.

“It remains the case that investors in all regions have confidence levels below the neutral level of 100. When we look at the pattern of recent investor equity flows – which favors the United States, Japan, Scandinavia and core Europe over peripheral Europe – it is clearly a defensive one with respect to further deterioration in euro-region prospects,” O’Connell said.

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