European investors lead drop in optimism as Asian confidence increases
Global investor confidence dropped slightly in April, led by European investors amid the conflict in Ukraine and the threat of further disinflation in Europe, according to the latest State Street Global Investor Confidence Index (ICI).
The political standoff in Ukraine with Russian President Vladimir Putin on one side and the European Union on the other continued to hit investor confidence in April, particularly in Europe. The standoff has seen sanctions leveled against businessmen close to Putin and shootouts between pro-Russians in eastern Ukraine and supporters of closer ties with the West.
Confidence had already been waning, however, due to fears of a further slowdown in inflation and a drag on corporate profits. Inflation in the euro area was 0.7 percent in April, its seventh straight month below the 1 percent mark. Slow inflation has raised prospects of eventual declines in consumer prices that could trigger economic stagnation.
‘The regional breakdown of confidence is telling as to where concerns lie,’ says Michael Metcalfe, senior vice president and head of multi-asset strategy for State Street Global Markets, in a press release. ‘The confidence of European investors fell to a five-month low [in April]. Fears of continued disinflation, uncertainty about how the European Central Bank will respond and ongoing geopolitical concerns mean investor confidence is understandably more fragile in the region.’
The global ICI fell 1.3 points to 119 at the end of April, according to State Street Global Exchange. The European ICI declined 6.5 points to 102 while the North American index dropped 2.4 points to 121.8. The Asian ICI, however, posted its fourth monthly gain in a row, climbing 1.4 points to 115.5.
An ICI reading above 100 indicates optimism and an increased appetite for risk, while a reading below 100 indicates investors are more pessimistic and decreasing their long-term holdings of any assets perceived as risky.
