European Gloom Dampens Global Positive Risk Appetite

Pessimism seeps through Europe, while Asian investors look to the upside.

(March 31, 2014) — European institutional investors’ gloomy outlook on the economy has dragged down a global snapshot of risk appetite and confidence in March, according to data from State Street.

The bank’s global Investor Confidence Index (ICI) fell by 2.5 points in March to 120.2, dragged primarily by European institutional investors’ outlook. This group’s ICI fell from February’s level of 110.1 to 108.6 this month.

The ICI was developed by State Street by measuring investor confidence or risk appetite quantitatively through analysing the buying and selling patterns of institutional investors—a reading of 100 is neutral.

Risk sentiment remained resilient in North America, while confidence among Asian investors increased, with the Asian ICI rising 7.4 points to 114.3 from the February reading of 106.9.

Despite the fall in confidence by European investors, the ICI creators said there had been little impact from recent geopolitical incidents.

“Geopolitical risk in the Ukraine, Turkey, and other emerging markets has yet to have a significant negative impact on institutional investor behaviour,” noted Kenneth Froot, partner at State Street Associates and co-creator of the index. “Institutions have largely maintained their allocations to equities on a global basis. With no major negative news appearing on the economic front, sentiment remained unaffected during the period.”

In October, the ICI reported a substantial drop in confidence among investors in North America recording from 104.3—a positive rating—to 86.5.

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