Global investor confidence dropped in October as a record surge in North American pessimism more than overpowered a sudden increase in European optimism.
The Global Investor Confidence Index (ICI) fell 5.6 points to 95.7 in October from a revised reading of 101.3 in September, State Street Global Exchange says in a press release. The decline came as an argument among US politicians over the deficit ceiling raised questions over the nation’s commitment to debt payment. It marks the third straight monthly drop in the global index, bringing it down 9.2 points since July.
North American investor sentiment fell a record 17.8 points to 86.5, entering the pessimistic territory below the 100-point mark, amid the political uncertainty. The European Investor Confidence Index, meanwhile, jumped 10.2 points to 111.9, its highest level in more than six years. Asian investor confidence was little changed, with a gain of 0.9 points to 96.2.
The increase in European optimism comes amid a growing perception that the continent has survived the worst of the troubles started in the financial crash of 2007 and 2008, and optimism the economy can soon resume growing. 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.
‘The fact that the North American ICI posted a record fall in the same month the European ICI posted its largest gain in almost three years tells you all you need to know about how policy perceptions are changing between the two areas,’ says Michael Metcalfe, head of cross-strategy research at State Street Global Markets.
‘With European confidence at its highest level since July 2007, investors hope the worst of the eurozone crisis is past. The US crisis of confidence, by contrast, may just be the beginning, unless policy uncertainty is reduced.’
