Global investor confidence dips slightly on macro concerns

Investor confidence dipped slightly in April on the previous month, driven mainly by a decline in the activity of North American investors due to fiscal concerns.

Confidence globally fell off by three points from 97.3 in March to 97 this month, according to the latest State Street survey which measures actual trades made by institutional investors rather than sentiment.

North American investors’ confidence declined by 3.9 points, or from 102.3 to 98.4. The latest reading shows US investors becoming more tentative in light of fiscal concerns surrounding the region, as well as Europe, especially with the reading pulling back from the neutral mark of 100, which indicates whether investors are increasing or decreasing their risk assets.

“Recent signals suggesting that US growth expectations for the first quarter may need to be trimmed, coupled with ongoing concerns about the resolution of fiscal deficits in both the US and Europe, have dampened enthusiasm for further equity risk allocations,” said Professor Kenneth Froot from Harvard University, one of the founders of the confidence index.

In both Europe and Asia confidence bounced back somewhat. European investor confidence rose by 6.3 points from its March level of 66.9 to 73.2. Asian investor sentiment increased 2.7 points to 99.2, from 96.5 in March.

But emerging markets inflows have fallen slightly in recent months, said Paul O’Connell at State Street Associates, another creator of the index.

“Though flows into emerging markets, particularly Emerging Asia, remain positive, they are no longer sufficient to outweigh the modest but persistent selling of developed markets equities that we have observed since last summer,” he warned.

The concerns echo those of UBS Group Chief Financial Officer John Cryan, who earlier on the same day pointed to turmoil in the Middle East and North Africa which impacted on the performance of emerging markets as a whole in the beginning of 2011.

He and the Group maintained a positive outlook overall on emerging markets, however.

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