Global investor confidence rose slightly in May as gains in Europe more than made up for increased pessimism in North America and Asia, according to State Street.
The State Street Global Investor Confidence Index (ICI) rose 0.5 points in May to 119.5, led by a gain of 9.3 points in the European ICI to 111.2 points. The North American ICI dropped 6.4 points to 115.5 while the Asian ICI declined 10.6 points to 104.4.
Europe’s gain came amid increasing speculation that the European Central Bank (ECB) will further ease its monetary policy in an attempt to accelerate economic growth and avoid a feared descent into deflation. ECB president Mario Draghi issued a warning in May over low inflation and said the bank is ‘comfortable’ with taking action to ensure it doesn’t remain low for too long.
Fears of a bubble in Chinese real estate and a slowdown in Chinese manufacturing prompted Asian investors to take more conservative stances and shun risk in May, while the prospects of further tapering in the US Federal Reserve’s quantitative easing, added to the possibilities of increases in short-term interest rates, prompted greater pessimism among many investors in North America.
‘Given the prospects for increased easing by the ECB, European institutions showed a more positive tone in May,’ says Jessica Donohue, senior managing director and head of research and advisory services at State Street Global Exchange, in a press release. ‘Gains in Europe have been somewhat offset by valuation concerns in the US, however, which have tempered the level of confidence in North America.’
All three regional indices remained around the 100-point level that represents a neutral outlook among investors. 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.
