North American investor confidence leads global decline, dropping 8.7 points, as Asian confidence rises, says State Street
Global investor confidence fell in August, led by investors in North America, as growth in key markets such as China showed further signs of slowing and the US economy exhibited mixed signals, according to State Street Global Markets.
State Street’s Investor Confidence Index (ICI) dropped to 90.9 points in August from a revised 94.3 points in July. The index for North America plunged 8.7 points to 84.4 points from a revised 93.1 points in July, according to State Street, which manages some $1.9 tn in assets in 29 countries.
‘While confidence among European and Asian investors has broadly stabilized, this month’s reading on North American risk appetite signals a clear setback,’ says Kenneth Froot, the Harvard University professor who developed the index, in a release. ‘We did note some concrete buying of European (ex-UK) equities, as policy makers took pains to try to limit the ‘tail-risk’ of a euro currency breakup, but in other regions flows were negative.
‘One change we did note is that the composition of flows is slightly less defensive than was true earlier in the year. For example, the materials and financial sectors gained at the expense of utilities and consumer staples.’
Investor confidence in Europe was little changed in August at 101.2 points, from 101.7 points, while confidence in Asia rose for a fourth consecutive month, climbing 2.9 points to 93.5 in August from a revised 90.6 in July, according to State Street.
‘There may also be some holiday and seasonal effects behind the numbers, in so far as the North American ICI has seen a decline each August since 2008,’ Froot says. ‘That said, the numbers suggest institutions are in a cautious mode, pending resolution of some of the key growth and debt concerns that continue to hang over the global economy.’
Sampling for the index was taken before Ben Bernanke, the US Federal Reserve chairman, delivered his August 31 speech to world central bankers in Jackson Hole, Wyoming, suggesting the possibility of another round of quantitative easing to stimulate economic growth and combat rising unemployment.
Bernanke’s speech prompted gains in global stock markets, particularly in regions seen as carrying a higher degree of risk, such as those in emerging economies.
While the global ICI declined in August, it is still up from 88.1 points in August 2011, which was the lowest-ever level for that month. Year to date, the index is down from 92.6 points in January.
